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Optimal Sales Schemes against Interdependent Buyers

  • Masaki Aoyagi

This paper studies a monopoly pricing problem when the seller can also choose the timing of a trade with each buyer endowed with private information about the seller's good. A buyer's valuation of the good is the weighted sum of his and other buyers' private signals, and is affected by the publicly observable outcomes of preceding transactions. We show that it is optimal for the seller to employ a sequential sales scheme in which trading with the buyers takes place one by one. Furthermore, when the degree of interdependence differs across buyers, we analyze how the optimal sales scheme orders them, and how it may induce herding among them.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0645.

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Date of creation: Oct 2005
Date of revision:
Handle: RePEc:dpr:wpaper:0645
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  1. Sgroi, D., 2000. "Optimizing Information in the Herd: Guinea Pigs, Profit and Welfare," Economics Papers 2000-w14, Economics Group, Nuffield College, University of Oxford.
  2. Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November.
  3. Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Springer, vol. 37(2), pages 203-241, November.
  4. Ochs, Jack & Park, In-Uck, 2004. "Overcoming the Coordination Problem: Dynamic Formation of Networks," CEI Working Paper Series 2004-18, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  5. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  6. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, October.
  7. Aoyagi, Masaki, 2010. "Information feedback in a dynamic tournament," Games and Economic Behavior, Elsevier, vol. 70(2), pages 242-260, November.
  8. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  9. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, October.
  10. Angeles de Frutos, Maria & Rosenthal, Robert W., 1998. "On Some Myths about Sequenced Common-Value Auctions," Games and Economic Behavior, Elsevier, vol. 23(2), pages 201-221, May.
  11. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
  12. Bose, Subir & Orosel, Gerhard O & Ottaviani, Marco & Vesterlund, Lise, 2005. "Dynamic Monopoly Pricing and Herding," CEPR Discussion Papers 5003, C.E.P.R. Discussion Papers.
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