This paper studies the problem of a monopolist privately informed about its product quality, who can sell its product in advance, and faces forward-looking buyers who learn about the quality over time. We show that if the monopolist prefers to sell sooner than later, the unique equilibrium satisfying a standard refinement criterion will be such that high-quality monopolists will postpone sales so as to separate themselves from low-quality ones. An application of the analysis is the allocation of sales among season tickets for sport or musical events. Several testable implications are derived in the comparative static analysis. A somewhat unexpected result is that an increase in the precision of the monopolist's information has a negative effect on economic efficiency.
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Publisher Info
Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number
476.
Length: 35 pages Date of creation: Oct 2000 Date of revision: Handle: RePEc:roc:rocher:476
Contact details of provider: Postal: UNIVERSITY OF ROCHESTER, CENTER FOR ECONOMIC RESEARCH, DEPARTMENT OF ECONOMICS, HARKNESS 231 ROCHESTER NEW YORK 14627 U.S.A.
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Find related papers by JEL classification: D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games