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Optimal mechanism for the sale of a durable good

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  • Laura Doval
  • Vasiliki Skreta

Abstract

We show that posted prices are the optimal mechanism to sell a durable good to a privately informed buyer when the seller has limited commitment in an infinite horizon setting. We provide a methodology for mechanism design with limited commitment and transferable utility. Whereas in the case of commitment, subject to the buyer's truthtelling and participation constraints, the seller's problem is a decision problem, in the case of limited commitment, the seller's problem corresponds to an intrapersonal game, where different "incarnations" of the seller represent the different beliefs he may have about the buyer's valuation.

Suggested Citation

  • Laura Doval & Vasiliki Skreta, 2019. "Optimal mechanism for the sale of a durable good," Papers 1904.07456, arXiv.org, revised Aug 2020.
  • Handle: RePEc:arx:papers:1904.07456
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    Cited by:

    1. Antoniou, Fabio & Fiocco, Raffaele, 2020. "Storable good market with intertemporal cost variations," MPRA Paper 97948, University Library of Munich, Germany.
    2. Juan Beccuti, 2020. "On the Optimality of Price-posting in Rental Markets," Diskussionsschriften dp2007, Universitaet Bern, Departement Volkswirtschaft.

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