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Sequentially Optimal Mechanisms -super-1

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  • Vasiliki Skreta

Abstract

This paper establishes that posting a price in each period is a revenue-maximizing allocation mechanism in a finite period model without commitment. A risk-neutral seller has one object to sell and faces a risk-neutral buyer whose valuation is private information and drawn from an arbitrary bounded subset of the real line. The seller has all the bargaining power: she designs a mechanism to sell the object at t, but if trade does not occur at t she can propose another mechanism at t + 1. We show that posting a price in each period is an optimal mechanism. A methodological contribution of the paper is to develop a procedure to characterize optimal dynamic incentive schemes under non-commitment that is valid irrespective of the structure of the agent's type. Copyright 2006, Wiley-Blackwell.

Suggested Citation

  • Vasiliki Skreta, 2006. "Sequentially Optimal Mechanisms -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1085-1111.
    • Handle: RePEc:oup:restud:v:73:y:2006:i:4:p:1085-1111
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2006.00409.x
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