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Selling with Evidence

Author

Listed:
  • Koessler, Fr�d�ric
  • Skreta, Vasiliki

Abstract

We study how to optimally sell a good in a bilateral asymmetric information monopoly setting with interdependent values when the informed seller can voluntarily and costlessly provide evidence about the good's characteristics. Equilibrium allocations are feasible and immune to deviations to any mechanism. We show that there is an ex-ante profit-maximizing selling procedure that is an equilibrium of the mechanism-proposal game. In contrast to posted price settings, information unravelling of product characteristics may fail even when all buyer types agree on the ranking of product quality.

Suggested Citation

  • Koessler, Fr�d�ric & Skreta, Vasiliki, 2017. "Selling with Evidence," CEPR Discussion Papers 12049, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12049
    as

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    References listed on IDEAS

    as
    1. Yilankaya, Okan, 1999. "A Note on the Seller's Optimal Mechanism in Bilateral Trade with Two-Sided Incomplete Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 267-271, July.
    2. John Riley & Richard Zeckhauser, 1983. "Optimal Selling Strategies: When to Haggle, When to Hold Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 267-289.
    3. W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
    4. Bull, Jesse & Watson, Joel, 2007. "Hard evidence and mechanism design," Games and Economic Behavior, Elsevier, vol. 58(1), pages 75-93, January.
    5. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Informed principal; consumer heterogeneity; interdependent valuations; product information disclosure; mechanism design; certification;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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