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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, Daniel, 2002. "Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare," Games and Economic Behavior, Elsevier, vol. 39(1), pages 137-166, April.
  2. Masaki Aoyagi, 2003. "Information Feedback in a Dynamic Tournament," ISER Discussion Paper 0580, Institute of Social and Economic Research, Osaka University.
  3. repec:cup:cbooks:9780521530927 is not listed on IDEAS
  4. Jack Ochs & In-Uck Park, 2005. "Overcoming the Coordination Problem: Dynamic Formation of Networks," Levine's Bibliography 172782000000000046, UCLA Department of Economics.
  5. Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society.
  6. repec:cup:cbooks:9780521824019 is not listed on IDEAS
  7. 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.
  8. 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.
  9. 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.
  10. Maria Angeles de Frutos & Robert W. Rosenthal, 1997. "On Some Myths about Sequenced Common-value Auctions," Papers 0077, Boston University - Industry Studies Programme.
  11. repec:rje:randje:v:37:y:2006:i:4:p:910-928 is not listed on IDEAS
  12. 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.
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