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Optimal priority pricing by a durable goods monopolist

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  • Correia-da-Silva, João

Abstract

A durable goods monopolist proposes selling mechanisms in two periods, being unable to commit in the first period on the mechanism to propose in the second. Trade is anonymous and resale is not possible. Although buyers have a continuum of possible valuations, the optimal first-period mechanism is a menu with at most two possibilities: a high price guaranteeing delivery and a low price subject to rationing. This characterization is robust to the arrival of additional buyers in the second period. The optimal mechanism is fully characterized for linear demand, with priority pricing being optimal if agents are sufficiently patient.

Suggested Citation

  • Correia-da-Silva, João, 2021. "Optimal priority pricing by a durable goods monopolist," Games and Economic Behavior, Elsevier, vol. 129(C), pages 310-328.
    • Handle: RePEc:eee:gamebe:v:129:y:2021:i:c:p:310-328
    DOI: 10.1016/j.geb.2021.06.005
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    References listed on IDEAS

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    1. Kim, Jaehong & Li, Mengling & Xu, Menghan, 0. "Priority search with outside options," Theoretical Economics, Econometric Society.

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    More about this item

    Keywords

    Priority pricing; Coase conjecture; Durable goods monopoly;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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