Robust Pricing for Quality Disclosure

Tan Gan and Hongcheng Li

Papers from arXiv.org

Abstract: A platform charges a producer for disclosing hard evidence of product quality to a consumer before trading. To tackle strategic uncertainty, the platform offers the producer quality-dependent and disclosure probability-dependent prices to maximize its revenue guarantee across all equilibria. The platform optimally offers off-path disclosure options to incentivize each producer type to "conquer herself" by deviating continually to full disclosure, yielding strictly convex advertising price functions of disclosure probability. Moreover, the platform prioritizes attracting higher types into service and offers them higher rents despite the absence of adverse selection. Comparative statics demonstrate that more informative hard evidence increases the platform's revenue guarantee.

Date: 2024-04, Revised 2024-11
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
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