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Managing Strategic Buyers

Author

Listed:
  • Johannes Hörner
  • Larry Samuelson

Abstract

We consider the problem of a monopolist who must sell her inventory before some deadline, facing buyers with independent private values. The seller faces a basic trade-off between imperfect price discrimination and maintaining an effective reserve price. When there is only one unit and only a few buyers, the seller essentially posts unacceptable prices up to the very end, at which point prices collapse in a series of jumps to a "reserve price" exceeding marginal cost. When there are many buyers, the seller abandons this reserve price in order to more effectively screen buyers, with prices decreasing continuously over time.

Suggested Citation

  • Johannes Hörner & Larry Samuelson, 2011. "Managing Strategic Buyers," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 379-425.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/660902
    DOI: 10.1086/660902
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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