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Dynamic Monopolies with Stochastic Demand

  • Walter Beckert

    (Department of Economics, Mathematics & Statistics, Birkbeck)

This paper analyzes equilibria in sequential take-it-or-leave-it sales and sequential auctions when demand is stochastic. It is shown that equilibria in the former mechanism trade-off allocative efficiency and competing buyers' opportunities to acquire an item to be sold, permitting prices and expected revenue above those of one-shot offers and sequential auctions. Hence Coase-type conjectures are invalid, and optimal sequential auctions can be dominated. This provides one explanation why some goods are typically sold in take-it-or-leave-it deals, while others are sold in auctions. An asymptotic revenue equivalence result is shown to reconcile the two mechanisms as the time horizon of the dynamic game gets large.

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File URL: http://www.bbk.ac.uk/ems/research/wp/PDF/BWPEF0404.pdf
File Function: First version, 2004
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Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 0404.

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Date of creation: May 2004
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Handle: RePEc:bbk:bbkefp:0404
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  16. Muthoo, Abhinay, 1994. "A Note on Repeated-Offers Bargaining with One-Sided Incomplete Information," Economic Theory, Springer, vol. 4(2), pages 295-301, March.
  17. 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.
  18. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  19. Thepot, Jacques, 1998. "A direct proof of the Coase conjecture," Journal of Mathematical Economics, Elsevier, vol. 29(1), pages 57-66, January.
  20. Majerus, D.W., 1992. "Durable Goods Monopoly with a Finite But Uncertain Number of Consumers," Papers 92-3, U.S. Department of Justice - Antitrust Division.
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  24. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
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