Signaling by Bayesian Persuasion and Pricing Strategy. Short title: Disclosure and Price Signaling

Yanlin Chen () and Jun Zhang ()
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Yanlin Chen: Nanjing Audit University
Jun Zhang: University of Technology Sydney

No 2019/14, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: This paper investigates how a privately informed seller could signal her type through Bayesian persuasion and pricing strategy. We find that it is generally impossible to achieve separation through one channel alone. Furthermore, the outcome that survives the intuitive criterion always exists and is unique. This outcome is separating, for which a closed-form solution is provided. The signaling concern forces the high-type seller to disclose inefficiently more information and charge a higher price, resulting in fewer sales and lower profit. Finally, we show that a regulation on minimal quality could potentially hurt social welfare, and private information hurts the seller.

Keywords: Bayesian persuasion; signaling; information disclosure; informed principal (search for similar items in EconPapers)
JEL-codes: D82 D83 L12 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2019-12-01
New Economics Papers: this item is included in nep-acc, nep-gth and nep-mic
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