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Optimal Sales Schemes against Interdependent Buyers

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  • Masaki Aoyagi

Abstract

This paper studies a monopoly pricing problem when the seller can choose the timing of a trade with each buyer, and a buyer's valuation of the seller's good is the weighted sum of his and other buyers' private signals. We show that it is optimal for the seller to employ a sequential scheme that trades with one buyer at a time and allows each buyer to observe the outcomes of all preceding transactions. We also identify conditions under which the seller optimally trades with the buyers in the increasing order of the weights they place on other buyers' signals. (JEL D42, D82, L12)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 2 (2010)
Issue (Month): 1 (February)
Pages: 150-82

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Handle: RePEc:aea:aejmic:v:2:y:2010:i:1:p:150-82

Note: DOI: 10.1257/mic.2.1.150
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References

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  1. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
  2. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  3. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  4. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
  5. Maria Angeles de Frutos & Robert W. Rosenthal, 1997. "On Some Myths about Sequenced Common-value Auctions," Papers 0077, Boston University - Industry Studies Programme.
  6. Sgroi, Daniel, 2002. "Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare," Games and Economic Behavior, Elsevier, vol. 39(1), pages 137-166, April.
  7. Bose, Subir & Orosel, Gerhard O & Ottaviani, Marco & Vesterlund, Lise, 2005. "Dynamic Monopoly Pricing and Herding," CEPR Discussion Papers 5003, C.E.P.R. Discussion Papers.
  8. Jack Ochs & In-Uck Park, 2005. "Overcoming the Coordination Problem: Dynamic Formation of Networks," Levine's Bibliography 172782000000000046, UCLA Department of Economics.
  9. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927.
  10. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019.
  11. Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society.
  12. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2006. "Dynamic monopoly pricing and herding," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 910-928, December.
  13. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Springer, vol. 37(2), pages 203-241, November.
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Cited by:
  1. Alexei Parakhonyak & Nick Vikander, 2013. "Optimal Sales Schemes for Network Goods," Discussion Papers 13-11, University of Copenhagen. Department of Economics.
  2. Aoyagi, Masaki, 2013. "Coordinating adoption decisions under externalities and incomplete information," Games and Economic Behavior, Elsevier, vol. 77(1), pages 77-89.

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