IDEAS home Printed from https://ideas.repec.org/a/eee/indorg/v103y2025ipbs0167718725000736.html

Disclosure and pricing with heterogeneous priors

Author

Listed:
  • Pham, Hien

Abstract

A monopolistic seller faces a buyer who holds a private prior belief about the product's match quality, which differs from the seller's prior. The seller can provide additional information about the product to refine the buyer's belief. We fully characterize the revenue-maximizing menu of price-information bundles, which follows a simple cutoff structure. While neither the diversity in the buyer's possible priors nor information design suffices to trigger price discrimination, their combination induces the optimal mechanism featuring both information and price discrimination. Moreover, we show that it is optimal to offer information free of charge.

Suggested Citation

  • Pham, Hien, 2025. "Disclosure and pricing with heterogeneous priors," International Journal of Industrial Organization, Elsevier, vol. 103(PB).
    • Handle: RePEc:eee:indorg:v:103:y:2025:i:pb:s0167718725000736
    DOI: 10.1016/j.ijindorg.2025.103207
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167718725000736
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijindorg.2025.103207?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Alex Smolin, 2023. "Disclosure and pricing of attributes," RAND Journal of Economics, RAND Corporation, vol. 54(4), pages 570-597, December.
    2. , & ,, 2008. "Consumer optimism and price discrimination," Theoretical Economics, Econometric Society, vol. 3(4), December.
    3. Hao Li & Xianwen Shi, 2017. "Discriminatory Information Disclosure," American Economic Review, American Economic Association, vol. 107(11), pages 3363-3385, November.
    4. Alonso, Ricardo & Câmara, Odilon, 2016. "Bayesian persuasion with heterogeneous priors," Journal of Economic Theory, Elsevier, vol. 165(C), pages 672-706.
    5. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120364, University Library of Munich, Germany, revised 06 Mar 2024.
    6. 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 309-327, May.
    7. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    8. Michael D. Grubb, 2009. "Selling to Overconfident Consumers," American Economic Review, American Economic Association, vol. 99(5), pages 1770-1807, December.
    9. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    10. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120462, University Library of Munich, Germany, revised 17 Mar 2024.
    11. Sherry He & Brett Hollenbeck & Davide Proserpio, 2022. "The Market for Fake Reviews," Marketing Science, INFORMS, vol. 41(5), pages 896-921, September.
    12. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120989, University Library of Munich, Germany, revised 06 Mar 2024.
    13. Dirk Bergemann & Stephen Morris, 2019. "Information Design: A Unified Perspective," Journal of Economic Literature, American Economic Association, vol. 57(1), pages 44-95, March.
    14. Pascal Courty & Li Hao, 2000. "Sequential Screening," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 697-717.
    15. Yingni Guo & Eran Shmaya, 2019. "The Interval Structure of Optimal Disclosure," Econometrica, Econometric Society, vol. 87(2), pages 653-675, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pham, Hien, "undated". "a reprendre_ WP annulé," TSE Working Papers 21-1263, Toulouse School of Economics (TSE).
    2. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120989, University Library of Munich, Germany, revised 06 Mar 2024.
    3. Inderst, Roman & Peitz, Martin, 2012. "Informing consumers about their own preferences," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 417-428.
    4. Maxim Ivanov, 2021. "Optimal monotone signals in Bayesian persuasion mechanisms," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 955-1000, October.
    5. Salamat, Ramtin, 2025. "Trial plans as a means of price discrimination," Games and Economic Behavior, Elsevier, vol. 153(C), pages 679-701.
    6. Terstiege, Stefan & Wasser, Cédric, 2020. "Buyer-optimal extensionproof information," Journal of Economic Theory, Elsevier, vol. 188(C).
    7. Lyu, Chen, 2023. "Information design for selling search goods and the effect of competition," Journal of Economic Theory, Elsevier, vol. 213(C).
    8. Mark Armstrong & Jidong Zhou, 2022. "Consumer Information and the Limits to Competition," American Economic Review, American Economic Association, vol. 112(2), pages 534-577, February.
    9. Guo, Yingni & Hao, Li & Shi, Xianwen, 2025. "Optimal discriminatory disclosure," Journal of Economic Theory, Elsevier, vol. 224(C).
    10. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120364, University Library of Munich, Germany, revised 06 Mar 2024.
    11. Mohsen Foroughifar & David Soberman, 2021. "Is More Precise Word of Mouth Better for a High Quality Firm? ... Not Always," Papers 2105.01040, arXiv.org, revised Apr 2022.
    12. Huiyi Guo & Wei He & Bin Liu, 2022. "Learning by Consuming: Optimal Pricing with Endogenous Information Provision," Papers 2209.01453, arXiv.org.
    13. Pham, Hien, 2023. "How Information Design Shapes Optimal Selling Mechanisms," MPRA Paper 120462, University Library of Munich, Germany, revised 17 Mar 2024.
    14. Bang, Se Hoon & Kim, Jaesoo, 2013. "Price discrimination via information provision," Information Economics and Policy, Elsevier, vol. 25(4), pages 215-224.
    15. Terstiege, Stefan, 2018. "On the signal realization set in contracting with information disclosure," Economics Letters, Elsevier, vol. 163(C), pages 83-86.
    16. Alonso, Ricardo & Zachariadis, Konstantinos E., 2024. "Persuading large investors," Journal of Economic Theory, Elsevier, vol. 222(C).
    17. Cheng, Xiaoyu, 2025. "Ambiguous persuasion: An ex-ante formulation," Games and Economic Behavior, Elsevier, vol. 154(C), pages 149-158.
    18. Charlson, G., 2021. "Rating the Competition: Seller Ratings and Intra-Platform Competition," Cambridge Working Papers in Economics 2106, Faculty of Economics, University of Cambridge.
    19. Shih-Tang Su & Vijay G. Subramanian & Grant Schoenebeck, 2021. "Bayesian Persuasion in Sequential Trials," Papers 2110.09594, arXiv.org, revised Nov 2021.
    20. Chan, Jimmy & Gupta, Seher & Li, Fei & Wang, Yun, 2019. "Pivotal persuasion," Journal of Economic Theory, Elsevier, vol. 180(C), pages 178-202.
      • Jimmy Chan & Seher Gupta & Fei Li & Yun Wang, 2018. "Pivotal Persuasion," Working Papers 2018-11-03, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:103:y:2025:i:pb:s0167718725000736. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505551 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.