Before revision: We characterize the revenue-maximizing Perfect Bayesian equilibrium for a seller who owns one unit of a durable good and interacts with a privately informed buyer over infinitely many periods. In each period, the seller can design a mechanism that determines the rules of trade. In the revenue-maximizing equilibrium, as long as a sale has not occurred, the seller chooses a mechanism that can be implemented as a posted price. Conceptually, this shows that the shape of the revenue-maximizing mechanism to sell a durable good is the same under commitment or limited commitment . Methodologically, the paper provides a recipe for problems of mechanism design with limited commitment .
After revision: We characterize the revenue-maximizing Perfect Bayesian equilibrium for a seller who owns one unit of a durable good and interacts with a privately informed buyer when the seller has limited commitment in an infinite horizon setting. We provide a methodology for mechanism design with limited commitment .