Informed seller with taste heterogeneity

Frederic Koessler and Vasiliki Skreta

Journal of Economic Theory, 2016, vol. 165, issue C, 456-471

Abstract: Consider a seller with a single indivisible good facing a buyer whose willingness to pay depends on his privately-known taste and on product characteristics privately known by the seller. What selling procedure can arise as an equilibrium of the game in which the seller strategically chooses mechanisms conditional on his information? We characterize the set of equilibrium outcomes and establish that ex-ante revenue-maximizing mechanisms are in this set. There is generally a continuum of revenue-ranked equilibrium outcomes. Focusing on the revenue-maximizing equilibrium, we show that the seller, in general, benefits from private information and does not benefit from committing to a disclosure or a certification technology. We also provide conditions under which the privacy of the seller's information does not affect revenue.

Keywords: Informed seller; Consumer heterogeneity; Product information disclosure; Mechanism design; Value of information (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (10)

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Working Paper: Informed seller with taste heterogeneity (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:165:y:2016:i:c:p:456-471

DOI: 10.1016/j.jet.2016.06.004

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