International College of Economics and Finance

Research seminar by Filippo Balestrieri (Hewlett-Packard Laboratories): «Informed seller in a Hotelling market»

Tuesday, May 24 at 4.30 pm International College of Economics and Faculty of Economics held joint Research seminar.
Venue: Pokrovski Bulvar, 11, Room Zh-822
Speaker: Filippo Balestrieri (Hewlett-Packard Laboratories)
Theme: «Informed seller in a Hotelling market» (joint with Sergei Izmalkov)

Abstract: We consider the problem of a monopolist who is selling a good and is privately informed about some of its attributes. We focus on the case where goods with different attributes are horizontally differentiated: in other words, they appeal to different segments of the market. Can the monopolist profit from concealing her private information? Is it optimal for her to reveal all good's attributes upfront? We show that in many circumstances, the monopolist maximizes her profit by not disclosing any information, which is in contrast to insights from auction theory and the informed-principal literature. We characterize the optimal selling mechanism for the informed monopolist. The optimal selling mechanism depends on the shape of the transportation cost function and on the base consumption value of agents. Still, if the base value is sufficiently high, then it is optimal not to disclose any information, if the base value is sufficiently low, then it is optimal to disclose the location. For intermediate base values, one can implement the optimal mechanism as the two-item menu: buy the good at the fixed price without disclosure, or buy the information about the location with the option of purchasing the good afterwards at a a predetermined exercise price.

Everyone interested is welcome to attend!

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