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Screening with Persuasion

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Abstract

We consider a general nonlinear pricing environment with private information. We characterize the information structure that maximizes the seller’s profits. The seller who cannot observe the buyer’s willingness to pay can control both the signal that a buyer receives about his value and the selling mechanism. The optimal screening mechanism has finitely many items even with a continuum of types. We identify sufficient conditions under which the optimal mechanism has a single item. Thus, the socially efficient variety of items is decreased drastically at the expense of higher revenue and lower information rents.

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  • Dirk Bergemann & Tibor Heumann & Stephen Morris, 2022. "Screening with Persuasion," Cowles Foundation Discussion Papers 2338, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2338
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    1. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2015. "The Limits of Price Discrimination," American Economic Review, American Economic Association, vol. 105(3), pages 921-957, March.
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    Cited by:

    1. Dirk Bergemann & Tibor Heumann & Stephen Morris, 2022. "Screening with Persuasion," Papers 2212.03360, arXiv.org.
    2. Andreas Haupt & Zoe Hitzig, 2023. "Opaque Contracts," Papers 2301.13404, arXiv.org.

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    More about this item

    Keywords

    Nonlinear Pricing; Finite Menu; Second-degree Price Discrimination; Recommender System;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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