Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/228895 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
Discussion Papers No. 20-07
Publisher: 
University of Bern, Department of Economics, Bern
Abstract: 
This paper considers a multi-period setting where a monopolist, with short-term commitment, rents one unit of a durable good to a single consumer in every period. The consumer's valuation constitutes his private information and remains constant over time. By using a mechanism design approach, the paper shows that the optimal renting strategy is to offer a simple price in every period. Although sophisticated mechanisms can make separation feasible when price-posting cannot achieve it, this happens precisely when separation is dominated by pooling. Moreover, the monopolist's choice of whether to discriminate or not depends on a simple and apparently myopic rule, reminiscent of its static equivalent.
Subjects: 
Durable good
renting
dynamic adverse selection
mechanism design
short-term commitment
price-posting
JEL: 
D82
D86
D42
Document Type: 
Working Paper

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