Search, bargaining and optimal asking prices

This paper analyzes a search-and-bargaining model in which the asking price influences the rate at which potential customers arrive to inspect the sel ler's house, and the buyer's valuation of the asset is not learned until af ter the seller makes his initial offer (the asking price). The optimal aski ng and reservation prices are characterized, and the existence of a subgame -perfect equilibrium asking-price-reservation-price strategy is established . Comparative-statics analysis illustrates how seller and buyer discount ra tes and the buyer's outside opportunity affect the optimal reservation and asking prices.