Selling to a manager and a budget-constrained agent

Debasis Mishra and Kolagani Paramahamsa

Journal of Mathematical Economics, 2024, vol. 115, issue C

Abstract: We analyze a model of selling a single object to a manager-agent pair who want to acquire the object for a firm. The manager and the agent have different assessments of the object’s value to the firm. The agent is budget-constrained while the manager is not. The agent participates in the mechanism, but she can (strategically) approach the manager for decision-making. We derive the revenue-maximizing mechanism in a two-dimensional type space (values of the agent and the manager). We show that below a threshold budget, a mechanism involving two posted prices and three outcomes (one of which involves randomization) is the optimal mechanism for the seller. Otherwise, a single posted price mechanism is optimal.

Keywords: Budget constraint; Posted price; Multidimensional mechanism design; Behavioral mechanism design (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:115:y:2024:i:c:s0304406824001228

DOI: 10.1016/j.jmateco.2024.103062

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