American Economic Review Vol. 107 No. 7 2017

Buyer-Optimal Learning and Monopoly Pricing

Anne-Katrin Roesler¹; Balázs Szentes²

¹ Department of Economics, University of Michigan, 611 Tappan Avenue, Ann Arbor, MI 48109 (email: ) · ² Department of Economics, London School of Economics, Houghton Street, London WC2A 2AE, UK (email: )

Abstract

This paper analyzes a bilateral trade model where the buyer's valuation for the object is uncertain and she observes only a signal about her valuation. The seller gives a take-it-or-leave-it offer to the buyer. Our goal is to characterize those signal structures which maximize the buyer's expected payoff. We identify a buyer-optimal signal structure which generates (i) efficient trade and (ii) a unit-elastic demand. Furthermore, we show that every other buyer-optimal signal structure yields the same outcome as the one we identify: in particular, the same price.

DOI

10.1257/aer.20160145

Volume

107

Issue

7

Pages

2072-2080

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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