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Discriminatory Information Disclosure

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  • Hao Li
  • Xianwen Shi

Abstract

We consider a price discrimination problem in which a seller has a single object for sale to a potential buyer. At the time of contracting, the buyer's private type is his incomplete private information about his value, and the seller can disclose additional private information to the buyer. We study the question of whether discriminatory information disclosure can be profitable to the seller under the assumption that, for the same disclosure policy, the amount of additional private information that the buyer can learn depends on his private type. In both discrete-type and continuous-type setting, we show that discriminatory disclosure can be optimal because, compared to full disclosure, it reduces the information rent accrued to private types of the buyer without much impact on the trade surplus. A complete characterization of the optimal discriminatory disclosure policy is provided in the discrete-type setting. We also establish sufficient conditions for the optimality of full information disclosure in the continuous-type setting.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-497.

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Length: Unknown pages
Date of creation: 10 Sep 2013
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Handle: RePEc:tor:tecipa:tecipa-497

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Related research

Keywords: Sequential Screening; Discriminatory Disclosure; Price Discrimination; Dynamic Mechanism Design;

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References

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  1. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
  2. Dirk Bergemann & Achim Wambach, 2013. "Sequential Information Disclosure in Auctions," Levine's Working Paper Archive 786969000000000771, David K. Levine.
  3. Dirk Bergemann & Maher Said, 2010. "Dynamic Auctions: A Survey," Cowles Foundation Discussion Papers 1757, Cowles Foundation for Research in Economics, Yale University.
  4. Raphael Boleslavsky & Maher Said, 2013. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 1-34.
  5. Péter Eső & Bal�zs Szentes, 2007. "Optimal Information Disclosure in Auctions and the Handicap Auction," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 705-731.
  6. Juan-Jos� Ganuza, 2004. "Ignorance Promotes Competition: An Auction Model of Endogenous Private Valuations," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 583-598, Autumn.
  7. Andrzej Skrzypacz & Simon Board, 2011. "Revenue Management with Forward-Looking Buyers," 2011 Meeting Papers 87, Society for Economic Dynamics.
  8. Che, Yeon-Koo, 1996. "Customer Return Policies for Experience Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 17-24, March.
  9. Gershkov, Alex & Moldovanu, Benny, 2012. "Dynamic allocation and pricing: A mechanism design approach," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 283-286.
  10. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
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