Buyer-Optimal Learning and Monopoly Pricing
American Economic Review
vol. 107,
no. 7, July 2017
(pp. 2072-80)
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.Citation
Roesler, Anne-Katrin, and Balázs Szentes. 2017. "Buyer-Optimal Learning and Monopoly Pricing." American Economic Review, 107 (7): 2072-80. DOI: 10.1257/aer.20160145Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D42 Market Structure, Pricing, and Design: Monopoly
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L12 Monopoly; Monopolization Strategies