Optimal sales mechanism with outside options

• 成果类型: Article
• 署名作者: Chang, Dongkyu
• 署名单位: City University of Hong Kong
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105279
• 发表日期: 2021
• 关键词: Delay; Option contract; outside option; Upfront payment; Quitting right

摘要

This paper studies the optimal design of sales mechanisms when a buyer can quit a negotiation for an outside option at any time. The main results show that the profit-maximizing mechanism induces a set of buyer types to delay purchasing a good if the value of the outside option is highly dispersed among buyer types. Moreover, to prevent a buyer from quitting a negotiation, the profit-maximizing mechanism also features an upfront payment, which is compensated later by a price discount. The seller can implement the profit-maximizing mechanism by offering a declining price path or a menu of European options. (c) 2021 Elsevier Inc. All rights reserved.