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Posted Offer Market

In a posted offer market, sellers publicly announce prices on a take-it-or-leave-it basis. In non-laboratory markets publicly posted list prices have become common in the last century for most of the developed economies. The essence of the trading rule in this market is described below.

The standard posted offer auction in a laboratory consists of an indefinitely repeated series of periods. In each period, trading occurs in two stages. In stage one, each seller privately selects a price for the period and indicates the maximum number of units to be offered at that price. Each seller's price ( and not the quantity) is displayed to buyers and to other sellers, once they have completed their own posting decisions. After all sellers have posted their prices in stage two a shopping sequence begins.

Buyers are randomly drawn, one at a time, and are given the opportunity to make purchases from any seller who has not sold his maximum specified sales quantity. When a buyer is done shopping another is selected. This process continues until all buyers have shopped, or until all offered units have been purchased.

There are many variants and special cases of posted-offer auctions. One common one is when the roles of buyers and sellers are reversed, so that buyer posts bids and sellers are selected in random order to make sales decisions, the institution is called a posted bid auction.

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