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Selling to a continuum of buyers with private values and entry costs

Author

Listed:
  • Xin Feng
  • Jingfeng Lu

Abstract

This paper studies the revenue‐maximizing selling mechanism with a continuum of buyers who have two‐dimensional private information: valuation and entry cost. Using optimal control methods, we solve this two‐dimensional screening problem with endogenous entry and derive sufficient conditions under which the optimal mechanism is a posted price. These conditions reduce the original problem to a one‐dimensional one in which a buyer's type is net valuation, and the optimal posted price matches that of the transformed environment. Finally, under mild conditions, revenue maximization implies underselling relative to the efficient allocation.

Suggested Citation

  • Xin Feng & Jingfeng Lu, 2026. "Selling to a continuum of buyers with private values and entry costs," Economic Inquiry, Western Economic Association International, vol. 64(3), pages 895-915, July.
    • Handle: RePEc:bla:ecinqu:v:64:y:2026:i:3:p:895-915
    DOI: 10.1111/ecin.70058
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    References listed on IDEAS

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