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We study the contractual design problem of a seller that observes an ex-post signal correlated with the buyer’s valuation and can make the allocation, but not payments, contingent on it.… Click to show full abstract
We study the contractual design problem of a seller that observes an ex-post signal correlated with the buyer’s valuation and can make the allocation, but not payments, contingent on it. We show that, to maximize her profit, the seller should offer a menu of contracts whereby the good is transferred to the buyer only if the signal is sufficiently low. The welfare implications of these contracts are also discussed.
Keywords:
contingent allocation;
allocation;
optimal contracts;
contracts contingent
Journal Title: Economics Letters
Year Published: 2020
Link to full text (if available)
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Journal Title: Economics Letters
Year Published: 2020
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!