Buyer-Optimal Learning and Monopoly Pricing
Anne-Katrin Roesler, Balázs Szentes
American Economic Review · 2017 · Volume 107 · Issue 7
Abstract
This paper analyzes a bilateral trade model where the buyer's valuation for the object is uncertain and she observes only a signal about her valuation. The seller gives a take-it-or-leave-it offer to the buyer. Our goal is to characterize those signal structures which maximize the buyer's expected payoff. We identify a buyer-optimal signal structure which generates (i) efficient trade and (ii) a unit-elastic demand. Furthermore, we show that every other buyer-optimal signal structure yields the same outcome as the one we identify: in particular, the same price.
Keywords
Consumer Economics: Theory, Market Structure, Pricing, and Design: Monopoly, Asymmetric and Private Information, Mechanism Design, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Monopoly, Monopolization Strategies
Enable JavaScript for citation tools and additional paper interactions.