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Repeated contracting without commitment

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  • Breig, Zachary

Abstract

I study a dynamic model of monopoly sales in which a monopolist without commitment power interacts with a consumer whose valuation is private. I characterize equilibria of this game and show how the seller's strategy varies with initial beliefs. I find that the seller's payoffs under spot contracting can be higher than under commitment with renegotiation and that random delivery contracts can improve payoffs beyond posted prices.

Suggested Citation

  • Breig, Zachary, 2022. "Repeated contracting without commitment," Journal of Economic Theory, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:jetheo:v:204:y:2022:i:c:s0022053122001041
    DOI: 10.1016/j.jet.2022.105514
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    References listed on IDEAS

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    1. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Comparative statics of the optimal dynamic incentive contract," European Economic Review, Elsevier, vol. 31(4), pages 901-926, June.
    2. Skreta, Vasiliki, 2015. "Optimal auction design under non-commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 854-890.
    3. Gerardi, Dino & Maestri, Lucas, 2020. "Dynamic contracting with limited commitment and the ratchet effect," Theoretical Economics, Econometric Society, vol. 15(2), May.
    4. Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Economics Letters, Elsevier, vol. 48(2), pages 193-199, May.
    5. Laura Doval & Vasiliki Skreta, 2022. "Mechanism Design With Limited Commitment," Econometrica, Econometric Society, vol. 90(4), pages 1463-1500, July.
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    7. Schmidt Klaus M., 1993. "Commitment through Incomplete Information in a Simple Repeated Bargaining Game," Journal of Economic Theory, Elsevier, vol. 60(1), pages 114-139, June.
    8. Breig, Zachary, 2019. "Endogenous and exogenous commitment," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
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    12. Bester, Helmut & Strausz, Roland, 2007. "Contracting with imperfect commitment and noisy communication," Journal of Economic Theory, Elsevier, vol. 136(1), pages 236-259, September.
    13. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1125-1156.
    14. Devanur, Nikhil R. & Peres, Yuval & Sivan, Balasubramanian, 2019. "Perfect Bayesian Equilibria in repeated sales," Games and Economic Behavior, Elsevier, vol. 118(C), pages 570-588.
    15. 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.
    16. Natalia Kovrijnykh, 2013. "Debt Contracts with Partial Commitment," American Economic Review, American Economic Association, vol. 103(7), pages 2848-2874, December.
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    18. Vasiliki Skreta, 2006. "Sequentially Optimal Mechanisms -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1085-1111.
    19. Beccuti, Juan & Möller, Marc, 2018. "Dynamic adverse selection with a patient seller," Journal of Economic Theory, Elsevier, vol. 173(C), pages 95-117.
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    Cited by:

    1. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.

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    More about this item

    Keywords

    Commitment; Mechanism design; Posted prices; Renegotiation; Spot contracting;
    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
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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