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Optimal Sales Schemes against Interdependent Buyers

  • Masaki Aoyagi

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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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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  1. Ochs, Jack & Park, In-Uck, 2010. "Overcoming the coordination problem: Dynamic formation of networks," Journal of Economic Theory, Elsevier, vol. 145(2), pages 689-720, March.
  2. 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.
  3. Sgroi, D., 2000. "Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare," Economics Papers 2000-w14, Economics Group, Nuffield College, University of Oxford.
  4. repec:cup:cbooks:9780521530927 is not listed on IDEAS
  5. repec:cup:cbooks:9780521824019 is not listed on IDEAS
  6. Maria Angeles de Frutos & Robert W. Rosenthal, 1997. "On Some Myths about Sequenced Common-value Auctions," Papers 0077, Boston University - Industry Studies Programme.
  7. 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.
  8. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
  10. 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.
  11. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
  12. Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November.
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