Optimal Selling Strategies When Buyers May Have Hard Information
Patrick W. Schmitz
University of Cologne; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. 5747
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.
Number of Pages in PDF File: 25
Keywords: mechanism design, hard information
JEL Classification: D42, D82working papers series
Date posted: August 23, 2006
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