IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Price discrimination through communication

  • Sher, Itai


    (Department of Economics, University of Minnesota)

  • Vohra, Rakesh


    (Department of Economics and Department of Electrical and Systems Engineering, University of Pennsylvania.)

We study a seller's optimal mechanism for maximizing revenue when a buyer may present evidence relevant to her value. We show that a condition very close to transparency of buyer segments is necessary and sufficient for the optimal mechanism to be deterministic--hence akin to classic third degree price discrimination--independently of non-evidence characteristics. We also find another sufficient condition depending on both evidence and valuations, whose content is that evidence is hierarchical. When these conditions are violated, the optimal mechanism contains a mixture of second and third degree price discrimination, where the former is implemented via sale of lotteries. We interpret such randomization in terms of the probability of negotiation breakdown in a bargaining protocol whose sequential equilibrium implements the optimal mechanism.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 10 (2015)
Issue (Month): 2 (May)

in new window

Handle: RePEc:the:publsh:1129
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Itai Sher & Rakesh Vohra, 2011. "Price Discrimination Through Communication," Discussion Papers 1536, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Elchanan Ben-Porath & Barton L. Lipman, 2009. "Implementation and Partial Provability," Boston University - Department of Economics - Working Papers Series wp2009-002, Boston University - Department of Economics.
  3. Green, Jerry R & Laffont, Jean-Jacques, 1986. "Partially Verifiable Information and Mechanism Design," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 447-56, July.
  4. Bull, Jesse & Watson, Joel, 2002. "Hard Evidence and Mechanism Design," University of California at San Diego, Economics Working Paper Series qt7715f08f, Department of Economics, UC San Diego.
  5. Jacob Glazer & Ariel Rubinstein, 2004. "On Optimal Rules of Persuasion," Econometrica, Econometric Society, vol. 72(6), pages 1715-1736, November.
  6. Dino Gerardi & Johannes Horner & Lucas Maestri, 2010. "The Role of Commitment in Bilateral Trade," Cowles Foundation Discussion Papers 1760, Cowles Foundation for Research in Economics, Yale University.
  7. Kartik, Navin & Tercieux, Olivier, 2012. "Implementation with evidence," Theoretical Economics, Econometric Society, vol. 7(2), May.
  8. Vohra,Rakesh V., 2011. "Mechanism Design," Cambridge Books, Cambridge University Press, number 9780521179461.
  9. Robert J. Aumann & Sergiu Hart, 2003. "Long Cheap Talk," Econometrica, Econometric Society, vol. 71(6), pages 1619-1660, November.
    • Robert J. Aumann & Sergiu Hart, 2002. "Long Cheap Talk," Discussion Paper Series dp284, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem, revised Nov 2002.
  10. Vohra,Rakesh V., 2011. "Mechanism Design," Cambridge Books, Cambridge University Press, number 9781107004368.
  11. Pai, Mallesh M. & Vohra, Rakesh, 2014. "Optimal auctions with financially constrained buyers," Journal of Economic Theory, Elsevier, vol. 150(C), pages 383-425.
  12. Rubinstein, Ariel & Glazer, Jacob, 2006. "A study in the pragmatics of persuasion: a game theoretical approach," Theoretical Economics, Econometric Society, vol. 1(4), pages 395-410, December.
  13. Sergei Severinov & Raymond Deneckere, 2006. "Screening when some agents are nonstrategic: does a monopoly need to exclude?," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 816-840, December.
  14. repec:rje:randje:v:37:y:2006:i:4:p:816-840 is not listed on IDEAS
  15. Celik, Gorkem, 2004. "Mechanism Design with Weaker Incentive Compatibility Constraints," working papers celik-04-09-13-05-50-40, Vancouver School of Economics, revised 06 Aug 2008.
  16. Moore, John, 1984. "Global Incentive Constraints in Auction Design," Econometrica, Econometric Society, vol. 52(6), pages 1523-35, November.
  17. Forges, Françoise & Koessler, Frédéric, 2005. "Communication equilibria with partially verifiable types," Economics Papers from University Paris Dauphine 123456789/168, Paris Dauphine University.
  18. Ausubel, Lawrence M. & Deneckere, Raymond J., 1989. "A direct mechanism characterization of sequential bargaining with one-sided incomplete information," Journal of Economic Theory, Elsevier, vol. 48(1), pages 18-46, June.
  19. Kos, Nenad, 2012. "Communication and efficiency in auctions," Games and Economic Behavior, Elsevier, vol. 75(1), pages 233-249.
  20. Ben-Porath, Elchanan & Lipman, Barton L., 2012. "Implementation with partial provability," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1689-1724.
  21. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  22. Sher, Itai, 2011. "Credibility and determinism in a game of persuasion," Games and Economic Behavior, Elsevier, vol. 71(2), pages 409-419, March.
  23. Sher, Itai, 2014. "Persuasion and dynamic communication," Theoretical Economics, Econometric Society, vol. 9(1), January.
  24. Nirvikar Singh & Donald Wittman, 2001. "original papers : Implementation with partial verification," Review of Economic Design, Springer, vol. 6(1), pages 63-84.
  25. Lipman Barton L. & Seppi Duane J., 1995. "Robust Inference in Communication Games with Partial Provability," Journal of Economic Theory, Elsevier, vol. 66(2), pages 370-405, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:the:publsh:1129. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin J. Osborne)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.