Price Mechanisms for Marketplaces

Marketplaces

A marketplace consists of supply — provided by sellers and demand — created by buyers.

A marketplace matches buyers with sellers.

We consider real or virtual goods (items). We do not consider here service marketplaces such as Uber.

A fundamental function of the marketplace is the pricing of items transacted through the market.

What mechanism can the marketplace use to set the price of the items sold through the market?

Pricing of Items

There are three basic models.

Fixed Price

The traditional model of pricing is the fixed price per item. A seller sets a price. A buyer either buys the thing at the set price and or not.

Auction