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In many long-term relationships, parties may be reluctant to reveal their private information in order to benefit from their informational advantage in the future. We point out that the strategic use of debt by an uninformed party induces another party to reveal private information. Our...
Persistent link: https://www.econbiz.de/10005661720
We base a contracting theory for a start-up firm on an agency model with observable but nonverifiable effort, and renegotiable contracts. Two essential restrictions on simple contracts are imposed: the entrepreneur must be given limited liability, and the investor's earnings must not decrease in...
Persistent link: https://www.econbiz.de/10005498043
Consumption of certain commodities produces transitory saturation, in the sense that potential instantaneous utility for an additional unit is very low immediately after a consumption episode, but increases over time. Such cyclical patterns of preferences have important implications for monopoly...
Persistent link: https://www.econbiz.de/10005791367
Switching costs and network effects bind customers to vendors if products are incompatible, locking customers or even markets in to early choices. Lock-in hinders customers from changing suppliers in response to (predictable or unpredictable) changes in efficiency, and gives vendors lucrative ex...
Persistent link: https://www.econbiz.de/10005124423
For many goods (such as experience goods or addictive goods), consumers' preferences may change over time. In this paper, we examine a monopolist's optimal pricing schedule when current consumption can affect a consumer's valuation in the future and valuations are unobservable. We assume that...
Persistent link: https://www.econbiz.de/10005497874
We investigate the robustness of the new foreclosure doctrine and its associated welfare implications to the introduction of incomplete information. In particular, we let the upstream firm’s marginal cost be private information, unknown to the downstream firms. The previous literature has...
Persistent link: https://www.econbiz.de/10005498007
We develop a theory of exclusive dealing that rehabilitates pre-Chicago-school analyses. Our theory rests on two realistic assumptions: that firms are imperfectly informed about demand, and that a dominant firm has a competitive advantage over its rivals. Under those assumptions, exclusive...
Persistent link: https://www.econbiz.de/10011084291
We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely,...
Persistent link: https://www.econbiz.de/10011145402
We propose to view action-contingent contracts as bets, motivated by different prior beliefs between the contracting parties (rather than, say, as an instrument for overcoming moral hazard problems). Such differences in prior beliefs may arise from inherent biases such as over-optimism. Menus of...
Persistent link: https://www.econbiz.de/10005666429
What is the optimal strategy of a durable-goods monopolist that can offer goods in different qualities? This Paper provides an answer for the case where the market is segmented into low- and high-income buyers. If the monopolist can change their product and price policy sufficiently rapidly -...
Persistent link: https://www.econbiz.de/10005789022