Monopolistic screening and uninformed buyers

Subir Bose

Economic Modelling, 2014, vol. 36, issue C, 348-353

Abstract: In the standard monopolistic screening problem, buyers obtain information rent as a result of possessing private information; if a contract can be offered before the buyer knows his valuation, the seller can extract the full (expected) surplus. I consider a situation where the buyer may or may not have private information about his valuation at the time the contract is offered. Is the seller (strictly) better off as compared to the standard situation? The answer depends crucially on the specific model. In the 2-types model, unless the probability (that the buyer is uninformed) reaches a critical threshold, the seller is unable to benefit from the buyer's ignorance. In the continuum-types model, on the other hand, optimal expected profit is strictly higher than in the standard model whenever this probability is positive.

Keywords: Monopolistic screening; Uninformed buyers (search for similar items in EconPapers)
JEL-codes: D42 D82 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:348-353

DOI: 10.1016/j.econmod.2013.09.057

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