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Informed seller with taste heterogeneity

Author

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  • Koessler, Frédéric
  • Skreta, Vasiliki

Abstract

Consider a seller with a single indivisible good facing a buyer whose willingness to pay depends on his privately-known taste and on product characteristics privately known by the seller. What selling procedure can arise as an equilibrium of the game in which the seller strategically chooses mechanisms conditional on his information? We characterize the set of equilibrium outcomes and establish that ex-ante revenue-maximizing mechanisms are in this set. There is generally a continuum of revenue-ranked equilibrium outcomes. Focusing on the revenue-maximizing equilibrium, we show that the seller, in general, benefits from private information and does not benefit from committing to a disclosure or a certification technology. We also provide conditions under which the privacy of the seller's information does not affect revenue.

Suggested Citation

  • Koessler, Frédéric & Skreta, Vasiliki, 2016. "Informed seller with taste heterogeneity," Journal of Economic Theory, Elsevier, vol. 165(C), pages 456-471.
    • Handle: RePEc:eee:jetheo:v:165:y:2016:i:c:p:456-471
    DOI: 10.1016/j.jet.2016.06.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Onur A. Koska & Frank Stähler, 2022. "Reserve Prices as Signals," Working Papers in Economics 22/10, University of Canterbury, Department of Economics and Finance.
    2. Dirk Bergemann & Alessandro Bonatti & Alex Smolin, 2018. "The Design and Price of Information," American Economic Review, American Economic Association, vol. 108(1), pages 1-48, January.
    3. Takeshi Nishimura, 2019. "Informed Principal Problems in Bilateral Trading," Papers 1906.10311, arXiv.org, revised Feb 2022.
    4. Koessler, Frederic & Skreta, Vasiliki, 2019. "Selling with evidence," Theoretical Economics, Econometric Society, vol. 14(2), May.
    5. Anastasios Dosis, 2022. "On the informed principal model with common values," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 792-825, December.
    6. Nishimura, Takeshi, 2022. "Informed principal problems in bilateral trading," Journal of Economic Theory, Elsevier, vol. 204(C).
    7. Ian Jewitt & Daniel Z. Li, 2017. "Cheap Talk Advertising in Auctions: Horizontally vs Vertically Differentiated Products," Department of Economics Working Papers 2017_03, Durham University, Department of Economics.
    8. Yamashita, Takuro, 2018. "Optimal Public Information Disclosure by Mechanism Designer," TSE Working Papers 18-936, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Informed seller; Consumer heterogeneity; Product information disclosure; Mechanism design; Value of information;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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