Foundations of dynamic monopoly and the coase conjecture

Faruk Gul; Hugo Sonnenschein; Robert Wilson

doi:10.1016/0022-0531(86)90024-4

Foundations of dynamic monopoly and the coase conjecture

Faruk Gul
, Hugo Sonnenschein
, Robert Wilson

Research output: Contribution to journal › Article › peer-review

406 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 language	English (US)
Pages (from-to)	155-190
Number of pages	36
Journal	Journal of Economic Theory
Volume	39
Issue number	1
DOIs	https://doi.org/10.1016/0022-0531(86)90024-4
State	Published - Jun 1986
Externally published	Yes

All Science Journal Classification (ASJC) codes

Economics and Econometrics

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10.1016/0022-0531(86)90024-4

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title = "Foundations of dynamic monopoly and the coase conjecture",

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.",

author = "Faruk Gul and Hugo Sonnenschein and Robert Wilson",

note = "Funding Information: * This paper was prepared during GUI and Sonnenschein{\textquoteright}s visit for a year at the Stanford Business School, which they acknowledge with appreciation. GUI and Sonnenschein acknowledge research support from National Science Foundation grant SES 8510135 to Princeton University; and Wilson, from NSF Grant SES 8308723 and ONR contract NOOOl\&799C0685 to Stanford University.",

year = "1986",

month = jun,

doi = "10.1016/0022-0531(86)90024-4",

language = "English (US)",

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journal = "Journal of Economic Theory",

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AU - Gul, Faruk

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AU - Wilson, Robert

N1 - Funding Information: * This paper was prepared during GUI and Sonnenschein’s visit for a year at the Stanford Business School, which they acknowledge with appreciation. GUI and Sonnenschein acknowledge research support from National Science Foundation grant SES 8510135 to Princeton University; and Wilson, from NSF Grant SES 8308723 and ONR contract NOOOl&799C0685 to Stanford University.

PY - 1986/6

Y1 - 1986/6

N2 - 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.

AB - 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.

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Foundations of dynamic monopoly and the coase conjecture

Abstract

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