Reputation in Bargaining and Durable Goods Monopoly

This paper analyzes durable goods monopoly in an infinite-horizon, discrete-time game. We prove that, as the time interval between successive offers approaches zero, all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria. This reverses a well-known co...

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Bibliographic Details
Published in:Econometrica 1989-05, Vol.57 (3), p.511-531
Main Authors: Ausubel, Lawrence M., Deneckere, Raymond J.
Format: Article
Language:English
Subjects:
Applied sciences
Bargaining
Bargaining theory
Consumer behavior
Consumer economics
Consumer equilibrium
Consumer prices
Consumers
Customers
Demand curves
Durable goods
Econometrics
Equilibrium
Exact sciences and technology
Miscellaneous
Monopolies
Monopoly
Negotiations
Operational research and scientific management
Operational research. Management science
Profitability theory
Profits
Reputations
Valuation
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Summary:This paper analyzes durable goods monopoly in an infinite-horizon, discrete-time game. We prove that, as the time interval between successive offers approaches zero, all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria. This reverses a well-known conjecture of Coase. Alternatively, one can interpret the model as a sequential bargaining game with one-sided incomplete information in which an uniformed seller makes all the offers. Our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game.
ISSN:0012-9682
1468-0262
DOI:10.2307/1911050