Correlation-Savvy Sellers

Roland Strausz

No 16, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: A multi-product monopolist sells sequentially to a buyer who privately learns his valuations. Using big data, the monopolist learns the intertemporal correlation of the buyer’s valuations. Perfect price discrimination is generally unattainable—even when the seller learns the correlation perfectly, has full commitment, and in the limit where the consumption good about which the buyer has ex ante private information becomes insignificant. This impossibility is due to informational externalities which requires information rents for the buyer’s later consumption. These rents induce upward and downward distortions, violating the generalized no distortion at the top principle of dynamic mechanism design.

Pages: 27 pages
Date: 2023-05-26
New Economics Papers: this item is included in nep-com, nep-des and nep-mic
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Related works:
Journal Article: Correlation‐savvy sellers (2024)
Working Paper: Correlation-Savvy Sellers (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0016

DOI: 10.48462/opus4-4960

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