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Screening by Mode of Trade

Author

Listed:
  • Juan Beccuti
  • Marc Moeller

Abstract

This paper proposes a mechanism design approach, capable of endogenizing a monopolist’s choice between selling and renting in a non-anonymous durable goods setting with short-term commitment. Allowing for mechanisms that determine the good’s allocation not only at the beginning but also at the end of a given period, we show that the profit-maximizing mechanism features screening by mode of trade. By selling to high types while renting to low types, the monopolist overcomes the obstacles encountered by intertemporal price discrimination and induces immediate separation of types for arbitrary low priors.

Suggested Citation

  • Juan Beccuti & Marc Moeller, 2019. "Screening by Mode of Trade," Diskussionsschriften dp1908, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp1908
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    File URL: http://www.vwl.unibe.ch/wp-content/uploads/papers/dp/dp1908.pdf
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    References listed on IDEAS

    as
    1. Jean Tirole, 2016. "From Bottom of the Barrel to Cream of the Crop: Sequential Screening With Positive Selection," Econometrica, Econometric Society, vol. 84, pages 1291-1343, July.
    2. Maestri, Lucas, 2017. "Dynamic contracting under adverse selection and renegotiation," Journal of Economic Theory, Elsevier, vol. 171(C), pages 136-173.
    3. Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 173-191.
    4. Deb, Rahul & Said, Maher, 2015. "Dynamic screening with limited commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 891-928.
    5. Jong‐Hee Hahn, 2006. "Damaged durable goods," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 121-133, March.
    6. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-1098, July.
    7. Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August.
    8. Laura Doval & Vasiliki Skreta, 2018. "Mechanism Design with Limited Commitment," Papers 1811.03579, arXiv.org, revised Aug 2020.
    9. Bruno Strulovici, 2017. "Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation‐Proof Contracts," Econometrica, Econometric Society, vol. 85, pages 585-616, March.
    10. Gerardi, Dino & Maestri, Lucas, 0. "Dynamic contracting with limited commitment and the ratchet effect," Theoretical Economics, Econometric Society.
    11. Beccuti, Juan & Möller, Marc, 2018. "Dynamic adverse selection with a patient seller," Journal of Economic Theory, Elsevier, vol. 173(C), pages 95-117.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Juan Beccuti, 2020. "On the Optimality of Price-posting in Rental Markets," Diskussionsschriften dp2007, Universitaet Bern, Departement Volkswirtschaft.

    More about this item

    Keywords

    Durable goods; Dynamic mechanism design; Coase problem; Ratchet effect; Screening;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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