Dynamic Monopolies with Stochastic Demand
AbstractThis paper analyzes equilibria in sequential take-it-or-leave-it sales and sequential auctions when demand is stochastic. It is shown that equilibria in the former mechanism trade-off allocative efficiency and competing buyers' opportunities to acquire an item to be sold, permitting prices and expected revenue above those of one-shot offers and sequential auctions. Hence Coase-type conjectures are invalid, and optimal sequential auctions can be dominated. This provides one explanation why some goods are typically sold in take-it-or-leave-it deals, while others are sold in auctions. An asymptotic revenue equivalence result is shown to reconcile the two mechanisms as the time horizon of the dynamic game gets large.
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Bibliographic InfoPaper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 0404.
Date of creation: May 2004
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- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
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