Optimal Selling Mechanisms with Endogenous Proposal Rights

Nenad Kos, Sarah Auster and Salvatore Piccolo ()

No 13542, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study a model of optimal pricing where the right to propose a mechanism is determined endogenously: a privately informed buyer covertly invests to increase the probability of offering a mechanism. We establish the existence of equilibrium and show that higher types get to propose a mechanism more often than lower types allowing the seller to learn from the trading process. In any equilibrium, the seller either offers the price he would have offered if he was always the one to make an offer or randomises over prices. Pure strategy equilibria may fail to exist, even when types are continuously distributed. A full characterization of equilibria is provided in the model with two types, where notably the seller's profit is shown to be non-monotonic in the share of high-value buyers.

Keywords: Mechanism design; Optimal pricing; Bargaining power (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-com, nep-des, nep-gth, nep-mic and nep-war
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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