Durable Goods Monopoly with Incomplete Information

Lawrence M. Ausubel and Raymond J. Deneckere

The Review of Economic Studies, 1992, vol. 59, issue 4, 795-812

Abstract: This article reconsiders the durable goods monopoly problem when the monopolist's marginal cost is private information. We show that the Coase Conjecture implies the No Trade Theorem: In any equilibrium in which the lowest-cost seller's initial offer approaches her marginal cost, the aggregate probability of trade must vanish. However, we also construct non-Coasean equilibria which approximate the unique outcome of the rental version of the same model. These (stationary) equilibria are comparatively efficient. The results are equally applicable to the mathematically-equivalent problem of sequential bargaining with two-sided incomplete information where one party makes all the offers.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:59:y:1992:i:4:p:795-812.

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