Optimal Dynamic Auctions for Durable Goods: Posted Prices and Fire-Sales

Speaker  Andzej Skrzypacz

Affiliation  Stanford

Host  Jennifer Chayes

Duration  01:08:54

Date recorded  21 July 2010

We consider a seller who wishes to sell K goods by time T. Potential buyers enter IID over time and are patient. At any point in time, profit is maximized by awarding the good to the agent with the highest valuation exceeding a cutoffs. These cutoffs are characterized by a one-period-look-ahead rule and are deterministic, depending only on the number of units left and the time remaining. The cutoffs decrease over time and in the inventory size, with the hazard rate of sales increasing as the deadline approaches. In the continuous time limit, the optimal allocation can be implemented by posted-prices with an auction at time T. Unlike the cutoffs, the prices depend on the history of past sales.

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