We show that posted prices are the optimal mechanism to sell a durable good to a privately informed buyer when the seller has limited commitment in an infinite horizon setting. We provide a methodology for mechanism design with limited commitmentand transferable utility. Whereas in the case of commitment, subject to the buyer's truthtelling and participation constraints, the seller's problem is a decision problem, in the case of limited commitment, the seller's problem corresponds to an intrapersonal game, where different "incarnations" of the seller represent the different beliefs he may have about the buyer's valuation .
A buyer wishes to purchase a durable good from a seller who in each period chooses a mechanism under limited commitment. The buyer's valuation is binary and fully persistent. We show that posted prices implement all equilibrium outcomes of an infinite-horizon, mechanism selection game. Despite being able to choose mechanisms, the seller can do no better and no worse than if he chose prices in each period, so that he is subject to Coase's conjecture. Our analysis marries insights from information and mechanism design with those from the literature on durable goods. We do so by relying on the revelation principle in Doval and Skreta (2020) .
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We show that posted prices are the optimal mechanism to sell
A buyer wishes to purchase
R
to a privately informed buyer when the seller has limited commitment in an infinite horizon setting. We provide a methodology for mechanism design with limited commitmentand transferable utility. Whereas in the case of commitment, subject to the
from a seller who in each period chooses a mechanism under limited commitment. The
R
truthtelling and participation constraints, the seller's problem is a decision problem, in the case of limited commitment, the seller's problem corresponds to an intrapersonal game, where different "incarnations" of the seller represent the different beliefs he may have about the buyer's valuation
valuation is binary and fully persistent. We show that posted prices implement all equilibrium outcomes of an infinite-horizon, mechanism selection game. Despite being able to choose mechanisms, the seller can do no better and no worse than if he chose prices in each period, so that he is subject to Coase's conjecture. Our analysis marries insights from information and mechanism design with those from the literature on durable goods. We do so by relying on the revelation principle in Doval and Skreta (2020)