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Screening with Persuasion

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Abstract

We analyze a nonlinear pricing model where the seller controls both product pricing (screening) and buyer information about their own values (persuasion). We prove that the optimal mechanism always consists of finitely many signals and items, even with a continuum of buyer values. The seller optimally pools buyer values and reduces product variety to minimize\ informational rents. We show that value pooling is optimal even for finite value distributions if their entropy exceeds a critical threshold. We also provide sufficient conditions under which the optimal menu restricts offering to a single item.

Suggested Citation

  • Dirk Bergemann & Tibor Heumann & Stephen Morris, 2025. "Screening with Persuasion," Cowles Foundation Discussion Papers 2338R3, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2338r3
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    File URL: https://cowles.yale.edu/sites/default/files/2025-03/d2338r3.pdf
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    More about this item

    Keywords

    Nonlinear Pricing; Screening; Bayesian Persuasion; 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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