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Durable Goods Monopoly with Incomplete Information

Durable Goods Monopoly with Incomplete Information 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. This content is only available as a PDF. © 1992 The Review of Economic Studies Limited http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

Durable Goods Monopoly with Incomplete Information

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References (18)

Publisher
Oxford University Press
Copyright
© 1992 The Review of Economic Studies Limited
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2297998
Publisher site
See Article on Publisher Site

Abstract

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. This content is only available as a PDF. © 1992 The Review of Economic Studies Limited

Journal

The Review of Economic StudiesOxford University Press

Published: Sep 1, 1992

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