8

Notice that an agent that observes pt discovers a price that has already been decreased by Δ. In general, and consistent with the actual implementation of the mechanism (see the figures reported in footnote 1), we have in mind situations in which both c and Δ are “small”. We stress from the outset that the condition Δ<c plays an important role in determining the equilibria of the game and the profitability of the mechanism. We will discuss in Section 4 the alternative assumption (which is never implemented in reality) Δc.