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Buyer-optimal learning and monopoly pricing

Author

Listed:
  • Roesler, Anne-Katrin
  • Szentes, Balázs

Abstract

This paper analyzes a bilateral trade model where the buyer’s valuation for the object is uncertain and she observes only a signal about her valuation. The seller gives a take-it-or-leave-it offer to the buyer. Our goal is to characterize those signal structures which maximize the buyer’s expected payoff. We identify a buyer-optimal signal structure which generates (i) efficient trade and (ii) a unitelastic demand. Furthermore, we show that every other buyer-optimal signal structure yields the same outcome as the one we identify: in particular, the same price

Suggested Citation

  • Roesler, Anne-Katrin & Szentes, Balázs, 2017. "Buyer-optimal learning and monopoly pricing," LSE Research Online Documents on Economics 84061, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:84061
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    File URL: https://researchonline.lse.ac.uk/id/eprint/84061/
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    References listed on IDEAS

    as
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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