Hikmet Gunay

Waiting for Signaling Quality

When a durable good of uncertain quality is introduced to the market, some consumers strategically delay their buying until the next period, with the hope of learning the unknown quality. I analyze the monopolists pricing and waiting strategies when consumers have strategic delay incentives. I show when the monopolist offers introductory low prices in pooling equilibria. I also find two types of separating equilibria: one where the high-type monopolist signals its quality by choosing a different price than the low-type monopolist in the first period and another where the high-type monopolist announces the product in the first period and waits to sell only in the second period. Waiting creates a credible cost for signaling; hence, the monopolist uses it as a signaling device.

Reserve Price When Bidders are Asymmetric

We analyze the optimal reserve price in a second price auction when there are N types of bidders whose valuations are drawn from different distribution functions. The seller cannot determine the specific type of each bidder. First, we show that the number of bidders affects the reserve price. Second, we give the sufficient conditions for the uniqueness of the optimal reserve price. Third, we find that if a bidder is replaced by a stronger bidder, the optimal reserve price may decrease. Finally, we give sufficient conditions that ensure the seller will not use a reserve price; hence, the auction will be efficient.

Strategic delay in market entry

Two firms are contemplating entry into a market that is viable for only one firm in a good state. We show that even if each firm receives a signal that perfectly reveals a good state, both might strategically delay entry, owing to the fear that the other firm might enter in the same period as well. We also find the conditions where the informed firm will let the rival firm know about the markets profitability and the two will merge to enter the market. We discuss the applications of this model to the oil industry and the generic drug industry.