DIRECTED SEARCH, COORDINATION FAILURE, AND SELLER PROFITS: AN EXPERIMENTAL COMPARISON OF POSTED PRICING WITH SINGLE AND MULTIPLE PRICES

Authors

  • NEJAT ANBARCI,

    1. Deakin University, Australia
    Search for more papers by this author
  • NICK FELTOVICH

    1. Monash University, Australia
    Search for more papers by this author
    • Financial support from Deakin University is gratefully acknowledged. Some of this research took place while Feltovich was at University of Aberdeen. We thank three anonymous referees, Richard Dutu, Simon Loertscher, and participants at several conferences and workshops for helpful suggestions and comments. Please address correspondence to Nick Feltovich, Department of Economics, Monash University, Clayton, VIC 3800, Australia. E-mail: nicholas.feltovich@monash.edu.


Abstract

We experimentally examine posted pricing and directed search. In one treatment, capacity-constrained sellers post fixed prices, which buyers observe before choosing whom to visit. In the other, firms post both “single-buyer” (applied when one buyer visits) and “multibuyer” (when multiple buyers visit) prices. We find, based on a 2 × 2 (two buyers and two sellers) market and a follow-up experiment with 3 inline image and 2 × 3 markets, that multibuyer prices can be lower than single-buyer prices or prices in the one-price treatment. Also, allowing the multibuyer price does not affect seller profits and increases market frictions.

Ancillary