Optimal sales contracts with withdrawal rights

Daniel Krähmer and Roland Strausz

No 2014-045, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We introduce ex post participation constraints in the standard sequential screening model. This captures the presence of consumer withdrawal rights as, for instance, mandated by EU regulation of "distance sales contracts". With such additional constraints, the optimal contract is static and, unlike with only ex ante participation constraints, does not elicit the agent's information sequentially. With ex post participation constraints it is insufficient to consider only local incentive constraints. We develop a novel technique to identify the relevant global constraints.

Keywords: Sequential screening; dynamic mechanism design; participation constraints; Mirrlees approach (search for similar items in EconPapers)
JEL-codes: D82 H57 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Sales Contracts with Withdrawal Rights (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2014-045

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