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Optimal Selling Strategies When Buyers May Have Hard Information

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Schmitz, Patrick W.

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Abstract

Consider a revenue-maximizing seller who can sell an object to one of n potential buyers. Each buyer either has hard information about his valuation (i.e., evidence that cannot be forged) or is ignorant. The optimal mechanism is characterized. It turns out that more ignorance can increase the expected total surplus. Even when the buyers are ex ante symmetric, the object may be sold to a buyer who does not have the largest willingness-to-pay. Nevertheless, an additional buyer increases the expected total surplus in the symmetric case, whereas more competition can be harmful if there are ex ante asymmetries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5747.

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Date of creation: Jul 2006
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Handle: RePEc:cpr:ceprdp:5747

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Related research
Keywords: hard information; mechanism design;

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Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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