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Selling with Evidence

Koessler, F; Skreta, V; (2018) Selling with Evidence. Theoretical Economics (In press). Green open access

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Abstract

We study the informed-principal problem in a bilateral asymmetric information trading setting with interdependent values and quasi-linear utilities. The informed seller proposes a mechanism and voluntarily certifies information about the good’s characteristics. When the set of certifiable statements is sufficiently rich, we show that there is an ex-ante profitmaximizing selling procedure that is an equilibrium of the mechanism proposal game. In contrast to posted price settings, the allocation obtained when product characteristics are commonly known (the unravelling outcome) may not be an equilibrium allocation, even when all buyer types agree on the ranking of product quality. Our analysis relies on the concept of strong Pareto optimal allocation, originally introduced by Maskin and Tirole (1990) in private value environments.

Type: Article
Title: Selling with Evidence
Open access status: An open access version is available from UCL Discovery
Publisher version: https://econtheory.org/
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Informed principal; consumer heterogeneity; interdependent valuations; product information disclosure; mechanism design; certification.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10057421
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