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Buyer-Optimal Learning and Monopoly Pricing

Anne-Katrin Roesler and Balázs Szentes

American Economic Review, 2017, vol. 107, issue 7, 2072-80

Abstract: This paper analyzes a bilateral trade model where the buyer's valuation for the object is uncertain and she observes only a signal about her valuation. The seller gives a take-it-or-leave-it offer to the buyer. Our goal is to characterize those signal structures which maximize the buyer's expected payoff. We identify a buyer-optimal signal structure which generates (i) efficient trade and (ii) a unit-elastic demand. Furthermore, we show that every other buyer-optimal signal structure yields the same outcome as the one we identify: in particular, the same price.

JEL-codes: D11 D42 D82 D83 L12 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20160145
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Working Paper: Buyer-optimal learning and monopoly pricing (2017) Downloads
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Handle: RePEc:aea:aecrev:v:107:y:2017:i:7:p:2072-80