Optimal Selling Strategies When Buyers May Have Hard Information

23 Pages Posted: 25 Nov 2007

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

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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 has not the largest willingness-to-pay. Nevertheless, an additional buyer increases the expected total surplus in the case of ex ante symmetry, whereas more competition can be harmful if there are asymmetries.

Suggested Citation

Schmitz, Patrick W., Optimal Selling Strategies When Buyers May Have Hard Information. European Economic Review, Vol. 51, No. 4, 2007. Available at SSRN: https://ssrn.com/abstract=1032144

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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