Sequential Screening and Renegotiation

Sonje Reiche, Apollo-University Of Cambridge Repository, Apollo-University Of Cambridge Repository
This paper considers a sequential screening problem. A seller sells an object to a buyer who is privately informed about the object's value. The value has two components. The buyer knows the ...rst component when he contracts with the seller and learns the second component only later. The optimal contract when there is no commitment problem is a sequential mechanism in form of a menu of fee-price pairs. Paying the initial fee gives the buyer the right to purchase the good later at the
more » ... ing price. High initial buyer types pay a high fee for a low price later. Each buyer chooses a di¤erent fee-price pair. If commitment is not feasible, the structure of the optimal contract is simpler. The optimal contract is either no contract, a simple forcing contract, or a contract in which high types buy for sure and low types pay an initial fee to buy the good at a price later. The di¤erence to the setting with commitment is that all low buyer types obtain the same fee-price pair and all high buyer types buy for sure. There is no to speci...c buyer types. This might explain some simple real life sales agreements and why ...rms might ...nd it optimal to group consumers into speci...c customer groups.
doi:10.17863/cam.5597 fatcat:dfbsctgel5fmpjtjesj7a4xshe