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Optimal mechanism for the sale of a durable good

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  • Skreta, Vasiliki
  • Doval, Laura

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

  • Skreta, Vasiliki & Doval, Laura, 2019. "Optimal mechanism for the sale of a durable good," CEPR Discussion Papers 13967, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13967
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    Cited by:

    1. Martino Banchio & Frank Yang, 2021. "Dynamic Pricing with Limited Commitment," Papers 2102.07742, arXiv.org, revised Dec 2021.
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    3. Juan Beccuti, 2020. "On the Optimality of Price-posting in Rental Markets," Diskussionsschriften dp2007, Universitaet Bern, Departement Volkswirtschaft.
    4. Quitz'e Valenzuela-Stookey, 2020. "Screening and Information-Sharing Externalities," Papers 2011.04013, arXiv.org.
    5. Francesco Giovannoni & Toomas Hinnosaar, 2022. "Pricing Novel Goods," Papers 2208.04985, arXiv.org.
    6. Fabio Antoniou & Raffaele Fiocco, 2023. "Storable Good Market With Intertemporal Cost Variations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 361-385, February.
    7. S. Nageeb Ali & Navin Kartik & Andreas Kleiner, 2022. "Sequential Veto Bargaining with Incomplete Information," Papers 2202.02462, arXiv.org, revised Apr 2023.
    8. Ekmekci, Mehmet & Maestri, Lucas, 2022. "Wait or act now? Learning dynamics in stopping games," Journal of Economic Theory, Elsevier, vol. 205(C).

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    More about this item

    Keywords

    Mechanism design; Limited commitment; Intrapersonal equilibrium; Information design; Self-generation; Posted price;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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