Mechanism design without monotone differences: an example featuring buyer habits

Levent Ülkü ()
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Levent Ülkü: Department of Economics and CIE, ITAM

Economic Theory Bulletin, 2014, vol. 2, issue 2, No 5, 183-195

Abstract: Abstract Within a simple parametric example, I show that if the buyer’s values fail the monotone differences condition, nonmonotone mechanisms are not just feasible but may even be desirable for a seller. The failure of monotone differences is caused by intertemporal consumption externalities in the form of habits. I show that for an interval of habit parameters the revenue maximizing mechanism is nonmonotone: the seller screens out low and high types.

Keywords: Implementation; Monotonicity; Monotone differences; Habits (search for similar items in EconPapers)
JEL-codes: D42 D61 D82 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s40505-014-0036-6

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