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Selling to a manager and a budget-constrained agent

Author

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  • Mishra, Debasis
  • Paramahamsa, Kolagani

Abstract

We analyze a model of selling a single object to a manager-agent pair who want to acquire the object for a firm. The manager and the agent have different assessments of the object’s value to the firm. The agent is budget-constrained while the manager is not. The agent participates in the mechanism, but she can (strategically) approach the manager for decision-making. We derive the revenue-maximizing mechanism in a two-dimensional type space (values of the agent and the manager). We show that below a threshold budget, a mechanism involving two posted prices and three outcomes (one of which involves randomization) is the optimal mechanism for the seller. Otherwise, a single posted price mechanism is optimal.

Suggested Citation

  • Mishra, Debasis & Paramahamsa, Kolagani, 2024. "Selling to a manager and a budget-constrained agent," Journal of Mathematical Economics, Elsevier, vol. 115(C).
    • Handle: RePEc:eee:mateco:v:115:y:2024:i:c:s0304406824001228
    DOI: 10.1016/j.jmateco.2024.103062
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