Abstract
The paper characterizes optimal renegotiation-proof rental contracts in a model with adverse selection and hidden information. It generalizes the work of Hart and Tirole (1988) to the case of time-varying valuations. The paper considers a durable-goods monopolist who serves a nonanonymous buyer with time-varying valuation for the seller's good. The buyer's valuation has a persistent and a transient component; both are private information. The paper shows that for some range of prior beliefs the seller strictly prefers leasing to selling.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 397-433 |
| Number of pages | 37 |
| Journal | Journal of Economics and Management Strategy |
| Volume | 7 |
| Issue number | 3 |
| DOIs | |
| State | Published - 1998 |
| Externally published | Yes |
ASJC Scopus subject areas
- General Business, Management and Accounting
- Economics and Econometrics
- Strategy and Management
- Management of Technology and Innovation