Screening with Persuasion

Dirk Bergemann (), Tibor Heumann and Stephen Morris
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Dirk Bergemann: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/dirk-bergemann
Tibor Heumann: Pontificia Universidad Catolica de Chile
Stephen Morris: Dept. of Economics, MIT

No 2338R3, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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.

Keywords: Nonlinear Pricing; Screening; Bayesian Persuasion; Finite Menu; Second-Degree Price Discrimination; Recommender System (search for similar items in EconPapers)
JEL-codes: D44 D47 D83 D84 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2025-03-06
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