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Screening by mode of trade

Juan Beccuti () and Marc Möller ()

Games and Economic Behavior, 2021, vol. 129, issue C, 400-420

Abstract: This paper endogenizes a monopolist's choice between selling and renting in a non-anonymous durable goods setting with short-term commitment, by allowing for contracts that determine the good's allocation not only at the beginning but also at the end of a given period. We show that the revenue-maximizing menu of contracts features screening by mode of trade when future trade is subject to frictions and the monopolist is more patient than consumers. Selling to high types while renting to low types, allows the monopolist to defer part of his compensation in form of a reduction of consumers' future information rents while lowering the allocational costs of ordinary, intertemporal screening.

Keywords: Durable goods; Dynamic mechanism design; Short-term commitment; Ratchet effect; Screening (search for similar items in EconPapers)
JEL-codes: D42 D82 D86 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Screening by Mode of Trade (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:129:y:2021:i:c:p:400-420

DOI: 10.1016/j.geb.2021.06.010

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