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Correlation-Savvy Sellers

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  • Strausz, Roland

    (HU Berlin)

Abstract

A multi-product monopolist sells sequentially to a buyer who privately learns his valuations. Using big data, the monopolist learns the intertemporal correlation of the buyer’s valuations. Perfect price discrimination is generally unattainable—even when the seller learns the correlation perfectly, has full commitment, and in the limit where the consumption good about which the buyer has ex ante private information becomes insignificant. This impossibility is due to informational externalities which re- quires information rents for the buyer’s later consumption. These rents induce upward and downward distortions, violating the generalized no distortion at the top principle of dynamic mechanism design.

Suggested Citation

  • Strausz, Roland, 2022. "Correlation-Savvy Sellers," Rationality and Competition Discussion Paper Series 347, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:347
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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