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Disclosure and Pricing of Attributes

Smolin, Alex (2019): Disclosure and Pricing of Attributes.

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Abstract

A monopolist sells an object characterized by multiple attributes. A buyer can be one of many types, differing in their willingness to pay for each attribute. The seller can disclose to the buyer arbitrary attribute information in the form of a statistical experiment. The seller decides how to price the object, what information to disclose, and how to price access to the information. To screen different types, the seller offers a menu of options that specify information prices, experiments, and object prices.

I characterize revenue-maximizing menus. If all types value the same attribute, then the seller cannot benefit from information disclosure and price discrimination. More generally, if each type values a single attribute and attributes are independent, then the seller can benefit from information disclosure but not from price discrimination. In other cases, a discriminatory menu can be profitable; however, optimal experiments always belong to a tractable class of linear disclosure policies. The analysis informs the operation of various intermediaries including business brokers and online recruiting platforms.

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