Informed seller with taste heterogeneity

Journal article: 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.

Author(s)

Frédéric Koessler, Vassiliki Skreta

Journal
  • Journal of Public Economic Theory
Date of publication
  • 2016
Keywords JEL
C72 D82
Keywords
  • Mechanism design
  • Product information disclosure
  • Value of information
  • Informed seller
  • Consumer heterogeneity
Pages
  • 456-471
Version
  • 1
Volume
  • 165