Foundations of dynamic monopoly and the coase conjecture

Faruk Gul, Hugo Sonnenschein, Robert Wilson

Research output: Contribution to journalArticle

313 Scopus citations

Abstract

Subgame-perfect equilibria are characterized for a market in which the seller quotes a price each period. Assume zero costs, positive interest rate, continuum of buyers, and some technical conditions. If buyers' valuations are positive then equilibrium is unique, buyers' strategies are stationary, and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere. Otherwise a continuum of stationary equilibria can exist, but at most one with analytic strategies. Coase's conjecture is verified for stationary strategies: reducing the period length drives all prices to zero or the least valuation. Connections to bargaining models are described.

Original languageEnglish (US)
Pages (from-to)155-190
Number of pages36
JournalJournal of Economic Theory
Volume39
Issue number1
DOIs
StatePublished - Jun 1986
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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