We study rationing as a tool of the monopolist’s selling policy when demand is uncertain. Three selling policies are potentially optimal in our environment: uniform pricing, final sales, and introductory offers. Final sales consist in charging a high price initially, but then lowering the...

We study rationing as a tool of the monopolist’s pricing strategy when demand is uncertain. Three pricing strategies are potentially optimal in our environment: uniform pricing, final sales, and introductory offers. The final sales strategy consists in charging a high price initially, but then...

We consider the dynamic pricing problem of a durable good monopolist with full commitment power, when a new version of the good is expected at some point in the future. The new version of the good is superior to the existing one, bringing a higher ow utility. If the arrival is a stationary...

We study dynamic bargaining with uncertainty over the buyer's valuation and the seller's outside option. A long-lived seller makes offers to a long-lived buyer whose value is private information. There may exist a short-lived buyer whose value is higher than that of the long-lived buyer. The...

We consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm’s investment. We focus on dynamic reputation equilibria, whereby consumers ‘discipline’ a firm by switching to its rival in the case that...

Consider two agents who learn the value of an unknown parameter by observing a sequence of private signals. The signals are independent and identically distributed across time but not necessarily across agents. We show that that when each agent's signal space is finite, the agents will commonly...

It is well-known that the ability of the Vickrey-Clarke-Groves (VCG) mechanism to implement efficient outcomes for private value choice problems does not extend to interdependent value problems. When an agent’s type affects other agents’ utilities, it may not be incentive compatible for him...

In McLean and Postlewaite (2002), we analyzed pure exchange economies with asymmetrically informed agents. We defined a notion of informational size and showed that, when the aggregate information of all agents resolves nearly all the uncertainty regarding the state of nature, the conflict...

Asymmetric information is an important source of inefficiency when assets (like firms) are transacted. The two main sources of this asymmetry are unobserved idiosyncratic characteristics of the asset (for example, quality) and unobserved idiosyncratic choices (actions done by the current...

Consider the following situation involving two agents who belong to a large society. One of the agents needs help to avoid a big loss. The other agent may either incur a low cost to help him or do nothing. If agents do not recognize each other, providing incentives for socially optimal behavior...