Outside Options and the Failure of the Coase Conjecture

Simon Board and Marek Pycia

American Economic Review, 2014, vol. 104, issue 2, 656-71

Abstract: A buyer wishes to purchase a good from a seller who chooses a sequence of prices over time. Each period the buyer can also exercise an outside option, abandoning their search or moving on to another seller. We show there is a unique equilibrium in which the seller charges a constant price in every period equal to the monopoly price, contravening the Coase conjecture. We then embed the singleseller model into a search framework and show the result provides a foundation for the usual "no haggling" assumption.

JEL-codes: C78 D42 D43 L12 L13 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.2.656
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.2.656 (application/pdf)
http://www.aeaweb.org/aer/ds/10402/20110634_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:104:y:2014:i:2:p:656-71

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().