Selling goods of unknown quality: Forward versus spot auctions

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Journal Article
Review of Economic Design, 2011, 15 (3), pp. 245 - 256
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We consider an environment where the sale can take place so early that both the seller and potential buyers have the same uncertainty about the quality of the good. We present a simple model that allows the seller to offer the good for sale before or after this uncertainty is resolved, namely via forward auction or spot auction, respectively. We solve for the equilibrium of these two auctions and then compare the resulting expected revenues. We also consider the revenue implications of insurance in forward auctions. © 2011 Springer-Verlag.
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