Using a Soft Deadline to Counter Monopoly

Abstract

A monopolist often exploits a hard deadline to raise their commitment power. I explore whether a group of buyers can employ a soft deadline to counter the monopoly. Using a simple model of a durable goods monopolist under a deadline, I show that the buyers' imperfect commitment to exit early may elicit a big sale from the monopolist and generate the buyers' premium. The soft deadline partially restores the self-competition dynamics of the Coase conjecture, which was previously constrained by the hard deadline. In the conventional wisdom on the Coase conjecture, the shorter bargaining horizon (or, interpretably, less durability of goods) augments monopoly power. A soft deadline breaks this link: the horizon appears shorter, but the buyers may be better off in expectation.