The Evolutionary Stability of Auctions over Bargaining

Equivalence of Auctions and Posted Prices

“…A recent model by Lu and McAfee (1996) fulfills these requirements. They study the relative performance of auction markets, and bargaining markets in a setting where agents are randomly matched.…”

“…The purpose of this article is to study posted price markets in a similar setting as Lu and McAfee (1996). It turns out that posted price markets are equivalent to auction markets which is somewhat surprising since the divison of surplus seems much different.…”

“…In Lu and McAfee (1996) the seller is driven to his reservation utility if only one buyer appears while if many buyers appear the price is such that the buyers are driven to their reservation utility in auction markets. In the posted price markets there is a fixed price, and thus the sellers surplus is the same regardless of the number of buyers.…”

Managing Online Auctions: Current Business and Research Issues

“…Yet, other factors also appear to be involved in determining when auctions are used. Lu and McAfee (1996) state that "the goods sold through either bargaining or auction institutions have similar properties: they are unique, expensive, and with uncertain equilibrium prices" (p. 229). Wang (1993) rejects the role of mean valuations in determining whether an auction is superior to a posted-price, taking a position consistent with Milgrom (1987), who states that "the only clear common denominator for the kinds of objects that are sold at auction is the need to establish individual prices for each item sold" (p. 2).…”

Scale returns of a random matching model

“…The aim of this note is to present a well known and well specified random matching model (see Lu and McAfee, 1996) and show that it exhibits constant returns to scale We also present a variation of the model, and determine the conditions under which it exhibits decreasing, constant, and increasing returns to scale. The matching model itself is attractive since it is amenable to applications, and because the meetings are not restricted to be pairwise; an agent can meet any number of other agents.…”