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Optimal Selling Strategies When Buyers May Have Hard Information

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  • Schmitz, Patrick W

Abstract

Consider a revenue-maximizing seller who can sell an object to one of n potential buyers. Each buyer either has hard information about his valuation (i.e., evidence that cannot be forged) or is ignorant. The optimal mechanism is characterized. It turns out that more ignorance can increase the expected total surplus. Even when the buyers are ex ante symmetric, the object may be sold to a buyer who does not have the largest willingness-to-pay. Nevertheless, an additional buyer increases the expected total surplus in the symmetric case, whereas more competition can be harmful if there are ex ante asymmetries.

Suggested Citation

  • Schmitz, Patrick W, 2006. "Optimal Selling Strategies When Buyers May Have Hard Information," CEPR Discussion Papers 5747, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5747
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    Cited by:

    1. Alessio Emanuele BIONDO, 2011. "High-Tech Products and the Double Adverse Selection: Does Commercial Distribution Worsen Efficiency?," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 1-18, December.

    More about this item

    Keywords

    hard information; mechanism design;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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