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More and more goods are being sold in sequences of auctions, in both consumer and business markets, but very few researchers have studied possible strategies for selling multiple units of durable goods in a sequence of auctions.
Robert Zeithammer, assistant professor of marketing, presented a new theory about the best ways to sell durable goods in dynamic auctions at the Quantitative Marketing and Economics Conference October 22 at Gleacher Center.
In “Optimal Selling in Dynamic Auctions: Information versus Commitment,” Zeithammer’s two models explore when the future sales of goods should be announced in advance, or pre-committed, and when they should be adapted to reflect what is learned about the market from past bids. Prior work on selling durables says that adaptation should always weakly dominate commitment. On the other hand, “intuition says that sellers should sell adaptively, and learn from past bids. This sounds like a good idea, but it isn’t always,” Zeithammer said. The trouble with adaptation, he said, is that sellers are competing against later versions of themselves, and buyers thus bid less early on.
Zeithammer concludes that when the seller’s costs are high or expected demand is weak, sellers prefer commitment. On the other hand, when the seller’s costs are low, or expected demand is high, sellers prefer adapting, learning about the market as the auctions continue.
Read about Professor Shapiro's paper on advertising and consumer behavior.
Read about the conference on Quantitative Marketing.
—Jennifer Vanasco