Price skimming: Commitment and delay in bargaining with outside option

Dongkyu Chang and Jong Jae Lee

Journal of Economic Theory, 2022, vol. 205, issue C

Abstract: This paper studies a bargaining problem in which the buyer's valuation and outside option are private information. We show that there exists a non-stationary equilibrium in which the seller can secure full commitment profit (from the optimal sales mechanism that exhibits price skimming) if and only if the buyer's outside option takes a zero value with positive probability (non-negligibly zero outside option). Our innovation is to show that (i) both the Coasean reversion and positive selection are necessary for the seller to secure the full commitment profit and (ii) the Coasean equilibria may coexist with positive selection despite their claimed incompatibility if the non-negligibly zero outside option exists.

Keywords: Bargaining; Outside option; Commitment; Price skimming; Coase conjecture; Positive selection (search for similar items in EconPapers)
JEL-codes: C78 D42 D43 D82 L12 L13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:205:y:2022:i:c:s0022053122001181

DOI: 10.1016/j.jet.2022.105528

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