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Informed seller with taste heterogeneity

Koessler, F; Skreta, V; (2016) Informed seller with taste heterogeneity. Journal of Economic Theory , 165 pp. 456-471. 10.1016/j.jet.2016.06.004. Green open access

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Consider a seller with a single indivisible good facing a buyer whose willingness to pay depends on his privately-known taste and on product characteristics privately known by the seller. What selling procedure can arise as an equilibrium of the game in which the seller strategically chooses mechanisms conditional on his information? We characterize the set of equilibrium outcomes and establish that ex-ante revenue-maximizing mechanisms are in this set. There is generally a continuum of revenue-ranked equilibrium outcomes. Focusing on the revenue-maximizing equilibrium, we show that the seller, in general, benefits from private information and does not benefit from committing to a disclosure or a certification technology. We also provide conditions under which the privacy of the seller's information does not affect revenue.

Type: Article
Title: Informed seller with taste heterogeneity
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jet.2016.06.004
Publisher version: http://dx.doi.org/10.1016/j.jet.2016.06.004
Language: English
Additional information: © 2016 Elsevier Inc. All rights reserved. This manuscript version is made available under a Creative Commons Attribution Non-commercial Non-derivative 4.0 International license (CC BY-NC-ND 4.0). This license allows you to share, copy, distribute and transmit the work for personal and non-commercial use providing author and publisher attribution is clearly stated. Further details about CC BY licenses are available at https://creativecommons.org/licenses/. Access may be initially restricted by the publisher.
Keywords: Social Sciences, Economics, Business & Economics, Informed seller, Consumer heterogeneity, Product information disclosure, Mechanism design, Value of information, OPTIMAL INFORMATION DISCLOSURE, PRINCIPAL-AGENT RELATIONSHIP, MECHANISM DESIGN, PRIVATE VALUES, AUCTION, FIRM
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1517891
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