Sequentially Optimal Mechanisms -super-1

Vasiliki Skreta

The Review of Economic Studies, 2006, vol. 73, issue 4, 1085-1111

Abstract: This paper establishes that posting a price in each period is a revenue-maximizing allocation mechanism in a finite period model without commitment. A risk-neutral seller has one object to sell and faces a risk-neutral buyer whose valuation is private information and drawn from an arbitrary bounded subset of the real line. The seller has all the bargaining power: she designs a mechanism to sell the object at t, but if trade does not occur at t she can propose another mechanism at t + 1. We show that posting a price in each period is an optimal mechanism. A methodological contribution of the paper is to develop a procedure to characterize optimal dynamic incentive schemes under non-commitment that is valid irrespective of the structure of the agent's type. Copyright 2006, Wiley-Blackwell.

Date: 2006
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