Buyer-Optimal Extensionproof Information

59 Pages Posted: 25 Jul 2017 Last revised: 27 Nov 2023

See all articles by Stefan Terstiege

Stefan Terstiege

Maastricht University - Department of Economics

Cédric Wasser

University of Basel - Faculty of Business and Economics

Date Written: March 10, 2020

Abstract

Motivated by the regulation of product information, we study buyer-optimal information structures under monopoly pricing. The information structure determines the buyer’s private learning of his valuation and in consequence the price the seller charges. By adding information, the seller may change the learning in her favor. We introduce the constraint that the information structure be extensionproof: the seller must have no incentive to add information. A two-parameter class of information structures implements every implementable buyer payoff. For some prior beliefs, but not for all, buyer-optimal information also results in efficient trade and in the same payoff for the seller as perfect learning.

Keywords: information design, monopoly, regulation

JEL Classification: D42, D82, D83, L51

Suggested Citation

Terstiege, Stefan and Wasser, Cédric, Buyer-Optimal Extensionproof Information (March 10, 2020). Available at SSRN: https://ssrn.com/abstract=3006600 or http://dx.doi.org/10.2139/ssrn.3006600

Stefan Terstiege

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Cédric Wasser (Contact Author)

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://www.cedricwasser.net

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