Multidimensional Screening with Rich Consumer Data

Mira Frick, Ryota Iijima and Yuhta Ishii

Papers from arXiv.org

Abstract: A multi-product monopolist faces a buyer who is privately informed about his valuations for the goods. As is well-known, optimal mechanisms are in general complicated, while simple mechanisms -- such as pure bundling or separate sales -- can be far from optimal and do not admit clear-cut comparisons. We show that this changes if the monopolist observes sufficiently rich data about the buyer's valuations: Now, pure bundling always outperforms separate sales; moreover, there is a sense in which pure bundling performs essentially as well as the optimal mechanism. To formalize this, we characterize how fast the corresponding revenues converge to the first-best revenue as the monopolist's data grows rich: Pure bundling achieves the same convergence rate to the first-best as optimal mechanisms; in contrast, the convergence rate under separate sales is suboptimal.

Date: 2024-11
New Economics Papers: this item is included in nep-des and nep-mic
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