Managing Strategic Buyers
Posted: 20 Jan 2011
There are 2 versions of this paper
Managing Strategic Buyers
Date Written: November 18, 2008
Abstract
We consider the problem of a monopolist with an object to sell before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. We show that the monopolist can always secure at least the larger of the static monopoly profit and the revenue from a Dutch auction with a zero reserve price. When there are only a few buyers, her profits are higher than this bound, and she essentially posts unacceptable prices up to the very end, at which point prices collapse to a "reservation price" that exceeds marginal cost. When there are many buyers, the seller abandons this reservation price in order to more effectively screen buyers. Her optimal policy then replicates a Dutch auction, with prices decreasing continuously over time. With more units to sell, prices jump up after each sale.
Keywords: Revenue management, Intertemporal price discrimination, Coase conjecture, Perishable goods, Reserve price, Dutch auction
JEL Classification: C72, D42, D82
Suggested Citation: Suggested Citation
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