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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Date of revision:
Contact details of provider:
Postal: Malet Street, London WC1E 7HX, UK
Phone: 44-20- 76316429
Fax: 44-20- 76316416
Web page: http://www.ems.bbk.ac.uk/
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeremy Bulow & Paul Klemperer, 1991.
"Rational Frenzies and Crashes,"
NBER Technical Working Papers
0112, National Bureau of Economic Research, Inc.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Muthoo, Abhinay, 1994. "A Note on Repeated-Offers Bargaining with One-Sided Incomplete Information," Economic Theory, Springer, vol. 4(2), pages 295-301, March.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
- Riley, John G & Samuelson, William F, 1981.
American Economic Review,
American Economic Association, vol. 71(3), pages 381-92, June.
- Thepot, Jacques, 1998. "A direct proof of the Coase conjecture," Journal of Mathematical Economics, Elsevier, vol. 29(1), pages 57-66, January.
- Wang, Ruqu, 1993.
"Auctions versus Posted-Price Selling,"
American Economic Review,
American Economic Association, vol. 83(4), pages 838-51, September.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- Ruqu Wang & Yongmin Chen, 1999. "Learning buyers' valuation distribution in posted-price selling," Economic Theory, Springer, vol. 14(2), pages 417-428.
- Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
- R. Preston McAfee & Daniel Vincent, 1994.
"Sequentially Optimal Auctions,"
1104, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Riley, John & Zeckhauser, Richard, 1983. "Optimal Selling Strategies: When to Haggle, When to Hold Firm," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 267-89, May.
- Majerus, D.W., 1992. "Durable Goods Monopoly with a Finite But Uncertain Number of Consumers," Papers 92-3, U.S. Department of Justice - Antitrust Division.
- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
- Paul Milgrom & Robert J. Weber, 1981.
"A Theory of Auctions and Competitive Bidding,"
447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bernhardt, Dan & Scoones, David, 1993.
"A Note on Sequential Auctions,"
829, California Institute of Technology, Division of the Humanities and Social Sciences.
- Laffont, J.-J. & Loisel, P. & Robert, J., 1998. "Intra-Day Dynamics in Sequential Auctions: Theory and Estimation," Papers 98.488, Toulouse - GREMAQ.
- Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1995. "Intertemporal Self-Selection with Multiple Buyers," Economic Theory, Springer, vol. 5(3), pages 513-26, May.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986.
"Foundations of dynamic monopoly and the coase conjecture,"
Journal of Economic Theory,
Elsevier, vol. 39(1), pages 155-190, June.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
- Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-78, December.
- Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
- Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.