IDEAS home Printed from https://ideas.repec.org/p/hum/wpaper/sfb649dp2014-045.html
   My bibliography  Save this paper

Optimal Sales Contracts with Withdrawal Rights

Author

Listed:
  • Daniel Krähmer
  • Roland Strausz
  • Melanie

Abstract

We study ex post information rents in sequential screening models where the agent receives private ex ante and ex post information. The principal has to pay ex post information rents for preventing the agent to coordinate lies about his ex ante and ex post information. When the agent’s ex ante information is discrete, these rents are positive, whereas they are zero in continuous models. Consequently, full disclosure of ex post information is generally suboptimal. Optimal disclosure rules trade off the benefits from adapting the allocation to better information against the effect that more information aggravates truth-telling.

Suggested Citation

  • Daniel Krähmer & Roland Strausz & Melanie, 2014. "Optimal Sales Contracts with Withdrawal Rights," SFB 649 Discussion Papers SFB649DP2014-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2014-045
    as

    Download full text from publisher

    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2014-045.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Strausz, Roland, 2006. "Deterministic versus stochastic mechanisms in principal-agent models," Journal of Economic Theory, Elsevier, vol. 128(1), pages 306-314, May.
    2. Bergemann, Dirk & Wambach, Achim, 2015. "Sequential information disclosure in auctions," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 1074-1095.
    3. John Riley & Richard Zeckhauser, 1983. "Optimal Selling Strategies: When to Haggle, When to Hold Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 267-289.
    4. Mann, Duncan P & Wissink, Jennifer P, 1990. "Money-Back Warranties vs. Replacement Warranties: A Simple Comparison," American Economic Review, American Economic Association, vol. 80(2), pages 432-436, May.
    5. Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
    6. Roman Inderst & Marco Ottaviani, 2013. "Sales Talk, Cancellation Terms and the Role of Consumer Protection," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 1002-1026.
    7. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
    8. Daniel Krähmer & Roland Strausz, 2011. "Optimal Procurement Contracts with Pre-Project Planning," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(3), pages 1015-1041.
    9. Gresik, Thomas A., 1991. "Ex ante efficient, ex post individually rational trade," Journal of Economic Theory, Elsevier, vol. 53(1), pages 131-145, February.
    10. Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
    11. Raphael Boleslavsky & Maher Said, 2013. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 1-34.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krähmer, Daniel & Strausz, Roland, 2013. "Ex post information rents and disclosure in sequential screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 406, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Krähmer, Daniel & Strausz, Roland, 2015. "Ex post information rents in sequential screening," Games and Economic Behavior, Elsevier, vol. 90(C), pages 257-273.
    3. Krähmer, Daniel & Strausz, Roland, 2017. "Sequential versus static screening: An equivalence result," Games and Economic Behavior, Elsevier, vol. 106(C), pages 317-328.
    4. Deb, Rahul & Said, Maher, 2015. "Dynamic screening with limited commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 891-928.
    5. Boaz Zik, 2023. "Efficient sequential screening with informational externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 567-590, February.
    6. Jean Tirole, 2016. "From Bottom of the Barrel to Cream of the Crop: Sequential Screening With Positive Selection," Econometrica, Econometric Society, vol. 84(4), pages 1291-1343, July.
    7. Dirk Bergemann & Juuso Välimäki, 2019. "Dynamic Mechanism Design: An Introduction," Journal of Economic Literature, American Economic Association, vol. 57(2), pages 235-274, June.
    8. Hao Li & Xianwen Shi, 2017. "Discriminatory Information Disclosure," American Economic Review, American Economic Association, vol. 107(11), pages 3363-3385, November.
    9. Dirk Bergemann & Alessandro Pavan, 2015. "Introduction to JET Symposium Issue on "Dynamic Contracts and Mechanism Design"," Cowles Foundation Discussion Papers 2016, Cowles Foundation for Research in Economics, Yale University.
    10. Toomas Hinnosaar & Keiichi Kawai, 2020. "Robust pricing with refunds," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 1014-1036, December.
    11. Akan, Mustafa & Ata, Barış & Dana, James D., 2015. "Revenue management by sequential screening," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 728-774.
    12. Garrett, Daniel F., 2017. "Dynamic mechanism design: Dynamic arrivals and changing values," Games and Economic Behavior, Elsevier, vol. 104(C), pages 595-612.
    13. Krähmer, Daniel & Kováč, Eugen, 2016. "Optimal sequential delegation," Journal of Economic Theory, Elsevier, vol. 163(C), pages 849-888.
    14. Bergemann, Dirk & Pavan, Alessandro, 2015. "Introduction to Symposium on Dynamic Contracts and Mechanism Design," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 679-701.
    15. von Wangenheim, Jonas, 2017. "Consumer-Optimal Information Design," Rationality and Competition Discussion Paper Series 53, CRC TRR 190 Rationality and Competition.
    16. Chifeng Dai, 2021. "Optimal sequential contract with a risk‐averse supplier," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 92-125, February.
    17. Arve, Malin & Zwart, Gijsbert, 2023. "Optimal procurement and investment in new technologies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    18. Michel, Christian, 2017. "Market regulation of voluntary add-on contracts," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 239-268.
    19. Litterscheid, Sina & Szalay, Dezsö, 2014. "Sequential, multidimensional screening," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100621, Verein für Socialpolitik / German Economic Association.
    20. Terstiege, Stefan, 2013. "Precontractual Investigation and Sequential Screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 429, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

    More about this item

    Keywords

    Sequential screening; dynamic mechanism design; participation constraints; Mirrlees approach;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hum:wpaper:sfb649dp2014-045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RDC-Team (email available below). General contact details of provider: https://edirc.repec.org/data/sohubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.