Date and Time: April 4th, 2018, 3:00 - 5:00 pm
Room: A 101 in the Economics Building (Museum)
In this paper I develop a model of a competing mechanism allowing buyers already engaged in an auction to decide whether to stay in it or buy an object from a posted price outside.
I show that when the amount of goods outside is less than the number of bidders in the auction, the latter, with valuations higher than the posted price, prefer to leave the auction early and buy the good at the posted price. When there is a competition among sellers, I show that they use both auctions and posted prices in the equilibrium. However, unlike models with unlimited supply of goods, the equilibrium does not result from discrimination between low- and high-valuation buyers, but rather as the strategic response of one seller using an auction to hedge against the price undercutting by another seller.