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Smart Contracts and the Coase Conjecture

Author

Listed:
  • Thomas Brzustowski
  • Alkis Georgiadis-Harris
  • Balázs Szentes

Abstract

This paper reconsiders the problem of a durable-good monopolist who cannot make intertemporal commitments. The buyer's valuation is binary and his private information. The seller has access to dynamic contracts and, in each period, decides whether to deploy the previous period's contract or to replace it with a new one. The main result of the paper is that the Coase conjecture fails: the monopolist's payoff is bounded away from the low valuation irrespective of the discount factor.

Suggested Citation

  • Thomas Brzustowski & Alkis Georgiadis-Harris & Balázs Szentes, 2023. "Smart Contracts and the Coase Conjecture," American Economic Review, American Economic Association, vol. 113(5), pages 1334-1359, May.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:5:p:1334-59
    DOI: 10.1257/aer.20220357
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    References listed on IDEAS

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    1. Drew Fudenberg & David Levine, 2008. "Subgame–Perfect Equilibria of Finite– and Infinite–Horizon Games," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 1, pages 3-20, World Scientific Publishing Co. Pte. Ltd..
    2. Simon, Leo K. & Zame, William R., 1987. "Discontinous Games and Endogenous Sharing Rules," Department of Economics, Working Paper Series qt8n46v2wv, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Perea, Andres, 2002. "A note on the one-deviation property in extensive form games," Games and Economic Behavior, Elsevier, vol. 40(2), pages 322-338, August.
    4. Simon, Leo K & Zame, William R, 1990. "Discontinuous Games and Endogenous Sharing Rules," Econometrica, Econometric Society, vol. 58(4), pages 861-872, July.
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    Cited by:

    1. Mingyong Hong & Jiao Long & Wenjun Zhuo, 2023. "Clan Networks, Spatial Selection, and Farmland Transfer Contracts: Evidence from China," Land, MDPI, vol. 12(8), pages 1-17, July.
    2. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.

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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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