40 Pages Posted: 13 Jul 2014
Date Written: July 11, 2014
How should a seller optimally sell his good to a buyer whose willingness to pay depends on his privately-known taste and on product characteristics privately known by the seller? The optimum is characterized by a mediated selling protocol and is sometimes implementable by bilateral face-to-face cheap talk after which the seller asks a price conditional on the conversation. Posted prices without cheap talk are suboptimal. The seller benefits ex-ante from private information and never benefits from committing to a disclosure or a certification technology. Ex-ante revenue-maximizing mechanisms are equilibria of this informed seller game and coincide with core mechanisms.
Keywords: Informed seller; consumer heterogeneity; product information disclosure; mechanism design; value of information
JEL Classification: C72; D82
Suggested Citation: Suggested Citation