Optimal Selling Strategies When Buyers May Have Hard Information

Patrick Schmitz

No 5747, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Consider a revenue-maximizing seller who can sell an object to one of n potential buyers. Each buyer either has hard information about his valuation (i.e., evidence that cannot be forged) or is ignorant. The optimal mechanism is characterized. It turns out that more ignorance can increase the expected total surplus. Even when the buyers are ex ante symmetric, the object may be sold to a buyer who does not have the largest willingness-to-pay. Nevertheless, an additional buyer increases the expected total surplus in the symmetric case, whereas more competition can be harmful if there are ex ante asymmetries.

Keywords: Mechanism design; Hard information (search for similar items in EconPapers)
JEL-codes: D42 D82 (search for similar items in EconPapers)
Date: 2006-07
New Economics Papers: this item is included in nep-mic
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Journal Article: Optimal selling strategies when buyers may have hard information (2007)
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