Work

Optimal Selling Mechanisms With Endogenous Seller Outside Offers

Year: 2026

Type: article

Abstract: ABSTRACT We examine a two‐stage selling mechanism design problem, where the buyer makes her report and the seller endogenously decides his effort (hidden investment) to generate a possibly better outside offer. The optimal mechanism shows that the seller's effort depends on the reported value of the buyer; a higher value lowers the seller's incentive to invest in the outside offer. After the price of the outside offer is realized, if the buyer's virtual value is less than the price, the seller takes the outside offer, and a termination fee equal to the virtual value is paid to the buyer.

Source: International Economic Review

DOI: 10.1111/iere.70056

Authors: Xiaogang Che, Tong Li, Jingfeng Lu, Xiaoyong Zheng

Institutions: City St George's, University of London, Vanderbilt University, National University of Singapore, North Carolina State University

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,570

OpenAlex ID: W7124766030

FWCI:

Cites: 43

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