Price skimming: commitment and delay in bargaining with outside option (Q2095255)

The renowned Coase conjecture implies that price skimming and the lack of commitment may not coexist: without precommitment, the seller is forced to charge an initial price equal to the buyer's lowest valuation, and all sales must occur immediately. The reasoning behind this so-called Coasean equilibrium is as follows. The seller's contemplated price reduction causes the buyer to reject the current price offer and wait for the next offer. Thus, the seller is tempted to hastily reduce the price over time. Such a price reduction becomes arbitrarily frequent, and the seller ends up charging an initial price low enough to clear the market. In this article, the authors show that price skimming naturally arises in equilibrium despite a complete lack of seller's commitment, when the buyer has a type-dependent outside option studied in [\textit{D. Chang}, J. Econ. Theory 195, Article ID 105279, 27 p. (2021; Zbl 1470.91126)]. It is more precisely proven that there exists a non-stationary equilibrium in which the seller can secure full commitment profit (from the optimal sales mechanism that exhibits price skimming) if and only if the buyer's outside option takes a zero value with positive probability (non-negligibly zero outside option). The main result is contained in the following statement: (i) both the Coasean reversion and positive selection are necessary for the seller to secure the full commitment profit and (ii) the Coasean equilibria may coexist with positive selection despite their claimed incompatibility if the non-negligibly zero outside option exists. The reader can find a relatively complete bibliography on this interesting subject.