A monopolist sells items repeatedly over time to a consumer with persistent private information. The seller has limited commitment: she cannot commit to a long-term contract but always has the option to commit to posted prices for unsold items.  We show that a static price path is the unique equilibrium outcome; that is, the seller cannot do better than simply posting the monopoly price for each item . The ratchet effect eliminates price discrimination gains for any degree of persistence of the private information . The paper also shows how dynamic mechanism design can help derive new results in games with limited commitment .
A monopolist sells items repeatedly over time to a consumer with persistent private information. The seller has limited commitment: she cannot commit to a long-term contract but always has the option to commit to posted prices for unsold items. A pricing strategy is static if it is history-independent. We show that the seller adopts static pricing in equilibrium . The ratchet effect eliminates potential gains from dynamic pricing for any degree of persistence of the private information .
A
A pricing strategy is static if it is history-independent.
R
a static price path is the unique equilibrium outcome; that is, the seller cannot do better than simply posting the monopoly price for each item
the seller adopts static pricing in equilibrium
R
price discrimination gains
potential gains from dynamic pricing
D
. The paper also shows how dynamic mechanism design can help derive new results in games with limited commitment