Posted prices versus bargaining in markets with asymmetric information

A search model is employed to analyze the choice between posting a price an d bargaining for the seller of an asset who is imperfectly informed about b oth buyer valuations and buyer bargaining abilities. A mean preserving incr ease in risk of buyer valuations is relevant (and beneficial) to the seller ; however, only the mean <(gamma)over bar> (and not the distribution) of bu yer bargaining abilities is relevant. If <(gamma)over bar> is sufficiently. high, the seller utilizes a posted price. Interestingly! social welfare de creases in <(gamma)over bar>; while an increase in <(gamma)over bar> reduce s expected search costs, it also results in misallocation of the good becau se the seller is less discriminating. (JEL D42, D83).