Durable Goods, Coasian Dynamics, and Uncertainty
Theory and Experiments
Bibliographic Data
| ID | 10176164 |
|---|---|
| Authors | Timothy N Cason (0000-0001-9581-5015, Purdue University West Lafayette), Tridib Sharma (Instituto Tecnológico Autónomo de México) |
| Year | 2001 |
| Volume | 109 |
| Issue | 6 |
| Pages | 1311-1354 |
| Publication date | 2001-12-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/323272 |
| OpenAlex | W2113556014 |
| Language | EN |
| References cited | 14 |
This paper presents a model in which a durable goods monopolist sells a product to two buyers. Each buyer is privately informed about his own valuation. Thus all players are imperfectly informed about market demand. We study the monopolist's pricing behavior as players' uncertainty regarding demand vanishes in the limit. In the limit, players are perfectly informed about the downward-sloping demand. We show that in all games belonging to a fixed and open neighborhood of the limit game there exists a generically unique equilibrium outcome that exhibits Coasian dynamics and in which play lasts for at most two periods. A laboratory experiment shows that, consistent with our theory, outcomes in the Certain and Uncertain Demand treatments are the same. Median opening prices in both treatments are roughly at the level predicted and considerably below the monopoly price. Consistent with Coasian dynamics, these prices are lower for higher discount factors. Demand withholding, however, leads to more trading periods than predicted
Coase theorem · Durable good · Economics · Limit (mathematics · Mathematical economics · Microeconomics · Monopoly · Outcome (game theory · Transaction cost · Valuation (finance · Economic theories and models · Experimental Behavioral Economics Studies · Game Theory and Applications · Mathematics
| Citation velocity | historical |
|---|---|
| Highly cited | No |