Optimal mechanism for the sale of a durable good

Laura Doval and Vasiliki Skreta

Theoretical Economics, 2024, vol. 19, issue 2

Abstract: A buyer wishes to purchase a durable good from a seller who in each period chooses a mechanism under limited commitment. The buyer's value is binary and fully persistent. We show that posted prices implement all equilibrium outcomes of an infinite-horizon, mechanism-selection game. Despite being able to choose mechanisms, the seller can do no better and no worse than if he chose prices in each period, so that he is subject to Coase's conjecture. Our analysis marries insights from information and mechanism design with those from the literature on durable goods. We do so by relying on the revelation principle in Doval and Skreta (2022).

Keywords: Mechanism design; limited commitment; information design; public PBE; posted prices; Coase conjecture (search for similar items in EconPapers)
JEL-codes: D84 D86 (search for similar items in EconPapers)
Date: 2024-05-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Optimal mechanism for the sale of a durable good (2021)
Working Paper: Optimal mechanism for the sale of a durable good (2019)
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