Selling with Evidence
37 Pages Posted: 22 May 2017
Date Written: May 2017
We study how to optimally sell a good in a bilateral asymmetric information monopoly setting with interdependent values when the informed seller can voluntarily and costlessly provide evidence about the good's characteristics. Equilibrium allocations are feasible and immune to deviations to any mechanism. We show that there is an ex-ante profit-maximizing selling procedure that is an equilibrium of the mechanism-proposal game. In contrast to posted price settings, information unravelling of product characteristics may fail even when all buyer types agree on the ranking of product quality.
Keywords: Informed principal; consumer heterogeneity; interdependent valuations; product information disclosure; mechanism design; certification
JEL Classification: C72, D82
Suggested Citation: Suggested Citation