Document Type
Discussion Paper
Publication Date
11-1-2008
CFDP Number
1684R
CFDP Revision Date
2010-09-01
CFDP Pages
67
Abstract
We consider the problem of a monopolist who must sell her inventory before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. The seller faces a basic trade-off between imperfect price discrimination and maintaining an effective reserve price. When there is only one unit and only a few buyers, the seller essentially posts unacceptable prices up to the very end, at which point prices collapse in a series of jumps to a “reserve price” that exceeds marginal cost. When there are many buyers, the seller abandons this reserve price in order to more effectively screen buyers. Her optimal policy then replicates a Dutch auction, with prices decreasing continuously over time.
Recommended Citation
Hörner, Johannes and Samuelson, Larry, "Managing Strategic Buyers" (2008). Cowles Foundation Discussion Papers. 2001.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2001