Delegated Selling and Intermediated Signaling

37 Pages Posted: 21 Jan 2023

See all articles by Maarten Janssen

Maarten Janssen

University of Vienna

Santanu Roy

Southern Methodist University (SMU) - Department of Economics


Asymmetric information about product quality can create incentives for a privately informed manufacturer to sell to uninformed consumers through a retailer and to maintain secrecy of upstream pricing. By delegating retail price setting to an intermediary the manufacturer can hide information about product quality, prevent double marginalization and avoid signaling distortions associated with direct selling. For intermediated signaling games of this sort, we outline a notion of equilibrium refinement that is motivated by considerations similar to the Intuitive Criterion for standard signaling games and show that under delegated selling pooling outcomes are consistent with the new refinement. Expected profit, consumer surplus and social welfare can all be higher with delegated selling. However, if secrecy of upstream pricing cannot be maintained, selling through a retailer can only lower the expected profit of the manufacturer.

Keywords: Asymmetric Information, Product Quality, Delegation, Intermediary, Signaling

Suggested Citation

Janssen, Maarten and Roy, Santanu, Delegated Selling and Intermediated Signaling. Available at SSRN: or

Maarten Janssen

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090

Santanu Roy (Contact Author)

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States

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