Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process
We examine a model of long-term contracting in which the buyer is privately informed about the stochastic process by which her value for a good evolves. In addition, the realized values are also private information. We characterize a class of environments in which the profit-maximizing long-term contract offered by a monopolist takes an especially simple structure: we derive sufficient conditions on primitives under which the optimal contract consists of a menu of deterministic sequences of static contracts. Within each sequence, higher realized values lead to greater quantity provision; however, an increasing proportion of buyer types are excluded over time, eventually leading to inefficiently early termination of the relationship. Moreover, the menu choices differ by future generosity, with more costly (up front) plans guaranteeing greater quantity provision in the future. Thus, the seller screens process information in the initial period and then progressively screens across realized values so as to reduce the information rents paid in future periods. Copyright , Oxford University Press.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 80 (2013)
Issue (Month): 1 ()
|Contact details of provider:|| |
References listed on IDEAS
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.:
- Oksana Loginova & Curtis Taylor, 2008.
"Price experimentation with strategic buyers,"
Review of Economic Design,
Springer, vol. 12(3), pages 165-187, September.
- Loginova, Oksana & Taylor, Curtis, 2003. "Price Experimentation with Strategic Buyers," Working Papers 03-02, Duke University, Department of Economics.
- Oksana Loginova & Curtis R. Taylor, 2005. "Price Experimentation with Strategic Buyers," Working Papers 0509, Department of Economics, University of Missouri.
- Alessandro Pavan, 2007.
"Long Term Contracting in a Changing World,"
1493, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Steven Matthews & John Moore, 1985.
"Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening,"
661, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-67, March.
- Andrzej Skrzypacz & Simon Board, 2011. "Revenue Management with Forward-Looking Buyers," 2011 Meeting Papers 87, Society for Economic Dynamics.
- Krähmer, Daniel & Strausz, Roland, 2010. "Optimal Procurement Contracts with Preâ€“Project Planning," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 303, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Dirk Bergemann & Juuso Valimaki, 2008.
"The Dynamic Pivot Mechanism,"
Cowles Foundation Discussion Papers
1672, Cowles Foundation for Research in Economics, Yale University.
- Dirk Bergemann & Juuso Välimäki, 2008. "The Dynamic Pivot Mechanism," Levine's Working Paper Archive 122247000000002340, David K. Levine.
- Dirk Bergemann & Juuso Valimaki, 2008. "The Dynamic Pivot Mechanism," Cowles Foundation Discussion Papers 1672R, Cowles Foundation for Research in Economics, Yale University, revised Dec 2009.
- Pascal Courty & Li Hao, 2000.
Review of Economic Studies,
Oxford University Press, vol. 67(4), pages 697-717.
- repec:rje:randje:v:37:y:2006:3:p:503-520 is not listed on IDEAS
- Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, vol. 93(1), pages 297-310, March.
- Marco Battaglini, 2003.
"Long-Term Contracting with Markovian Consumers,"
Theory workshop papers
505798000000000048, UCLA Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:80:y:2013:i:1:p:1-34. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.