Two popular selling methods are compared in a one-period correlated private-values model. The seller of an object has to decide whether to sell it by posting a fixed price or by an auction. Without auctioning costs, an auction (with a reserve price) is always preferable. With positive auctioning...

A model is presented in which market prices systematically understate fundamental values. The result follows from assumptions that the market is organized along auction lines with private information and is imperfect in that owners are occasionally forced to sell in order to raise cash for...