Buyer Coalitions Against Monopolistic Screening: On the Role Of Asymetric Information Among Buyers

UPF Economics and Business Working Paper No. 624

48 Pages Posted: 30 Jul 2002

See all articles by Doh-Shin Jeon

Doh-Shin Jeon

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Domenico Menicucci

Universita' degli Studi di Firenze

Date Written: May 31, 2002

Abstract

The traditional theory of monopolistic screening tackles individual self-selection but does not address the possibility that buyers could form a coalition to coordinate their purchases and to reallocate the goods. In this paper, we design the optimal sale mechanism which takes into account both individual and coalition incentive compatibility focusing on the role of asymmetric information among buyers. We show that when a coalition of buyers is formed under asymmetric information, the monopolist can do as well as when there is no coalition. Although in the optimal sale mechanism marginal rates of substitution are not equalized across buyers (hence there exists room for arbitrage), they fail to realize the gains from arbitrage because of the transaction costs in coalition formation generated by asymmetric information.

Keywords: Monopolistic screening, coalition incentive compatibility, asymetric information, transaction costs

JEL Classification: D42, D82

Suggested Citation

Jeon, Doh-Shin and Menicucci, Domenico, Buyer Coalitions Against Monopolistic Screening: On the Role Of Asymetric Information Among Buyers (May 31, 2002). UPF Economics and Business Working Paper No. 624, Available at SSRN: https://ssrn.com/abstract=320900 or http://dx.doi.org/10.2139/ssrn.320900

Doh-Shin Jeon (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34) 93 542 16 57 (Phone)
(34) 93 542 17 46 (Fax)

Domenico Menicucci

Universita' degli Studi di Firenze ( email )

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Firenze, 50127
Italy
+39-055-4374666 (Phone)
+39-055-4374913 (Fax)

HOME PAGE: http://www.dmd.unifi.it/index.php?loc=personal&id=d.menicucci

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