Long-term contracting with Markovian consumers

• 成果类型: Article
• 署名作者: Battaglini, M
• 署名单位: Princeton University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/0002828054201369
• 发表日期: 2005
• 页码: 637-658
• 关键词: Adverse selection; private information; RENEGOTIATION; COMMITMENT; insurance; DYNAMICS; MARKETS

摘要

To study how a firm can capitalize on a long-term customer relationship, we characterize the optimal contract between a monopolist and a consumer whose preferences follow a Markov process. The optimal contract is nonstationary and has infinite memory, but is described by a simple state variable. Under general conditions, supply converges to the efficient level for any degree of persistence of the types and along any history, though convergence is history-dependent. In contrast, as with constant types, the optimal contract can be renegotiation-proof, even with highly persistent types. These properties provide insights into the optimal ownership structure of the production technology.