IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/0820.html
   My bibliography  Save this paper

Sequential Screening and Renegotiation

Author

Listed:
  • Reiche, S.

Abstract

This paper considers a sequential screening problem. A seller sells an object to a buyer who is privately informed about the object's value. The value has two components. The buyer knows the first component when he contracts with the seller and learns the second component only later. The optimal contract when there is no commitment problem is a sequential mechanism in form of a menu of fee-price pairs. Paying the initial fee gives the buyer the right to purchase the good later at the corresponding price. High initial buyer types pay a high fee for a low price later. Each buyer chooses a different fee-price pair. If commitment is not feasible, the structure of the optimal contract is simpler. The optimal contract is either no contract, a simple forcing contract, or a contract in which high types buy for sure and low types pay an initial fee to buy the good at a price later. The di¤erence to the setting with commitment is that all low buyer types obtain the same fee-price pair and all high buyer types buy for sure. There is no fine-tuning to specific buyer types. This might explain some simple real life sales agreements and why firms might find it optimal to group consumers into specific customer groups.

Suggested Citation

  • Reiche, S., 2008. "Sequential Screening and Renegotiation," Cambridge Working Papers in Economics 0820, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0820
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0820.pdf
    File Function: Working Paper Version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Pascal Courty & Li Hao, 2000. "Sequential Screening," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 697-717.
    2. Daniel Krähmer & Roland Strausz, 2011. "Optimal Procurement Contracts with Pre-Project Planning," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 1015-1041.
    3. Andreas Blume, 1998. "Contract Renegotiation with Time-Varying Valuations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 397-433, September.
    4. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
    5. Oliver D. Hart & Jean Tirole, 1988. "Contract Renegotiation and Coasian Dynamics," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 509-540.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0820. 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: (Jake Dyer). General contact details of provider: http://www.econ.cam.ac.uk/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.