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Profiling and Endogenous Valuation

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Listed:
  • Anh Nguyen
  • Teck Yong Tan

Abstract

We study a monopolist facing a buyer whose valuation is determined by pre-trade investment. Before setting price, the seller observes a signal about the buyer's private investment cost (buyer profiling). Information that helps the seller extract surplus can also undermine the buyer's incentive to create it. We characterize the buyer-seller payoffs attainable across all possible profiling. On the Pareto frontier, if investment increases, hold-up risk always raises the payoff that the seller captures faster than the surplus that the investment creates. Protecting buyer welfare therefore requires discouraging investment, even though investment is socially efficient.

Suggested Citation

  • Anh Nguyen & Teck Yong Tan, 2026. "Profiling and Endogenous Valuation," Papers 2607.19558, arXiv.org.
    • Handle: RePEc:arx:papers:2607.19558
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    File URL: https://arxiv.org/pdf/2607.19558
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    References listed on IDEAS

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    1. Navin Kartik & Weijie Zhong, 2023. "Lemonade from Lemons: Information Design and Adverse Selection," Papers 2305.02994, arXiv.org, revised Sep 2025.
    2. Dirk Bergemann & Tibor Heumann & Michael C. Wang, 2024. "Screening and Segmenting: A Consumer Surplus Perspective," Papers 2401.12366, arXiv.org, revised Jun 2026.
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