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TOPIC:
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LEARNING BY CONSUMING: OPTIMAL PRICING WITH ENDOGENOUS INFORMATION PROVISION
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ABSTRACT
We study the revenue-maximizing mechanism when a buyer’s value evolves because of learning-by-consuming. The buyer chooses the initial consumption based on his rough valuation. Consuming more induces a finer valuation estimate, after which he determines the final consumption. The optimum is a try-and-decide contract. In equilibrium, a higher first-stage valuation buyer chooses more initial consumption and enjoys a lower second-stage per-unit price. Methodologically, we address the difficulty that without the single-crossing condition, monotonicity plus envelope condition is insufficient for incentive compatibility. Our results help to understand contracts with learning features; e.g., leasing contracts for experience goods and trial course sessions.
Keywords: Adverse selection, Dynamic mechanism design, Endogenous type distribution, Information provision, Rotation order, Experience good.
JEL Codes: D44, D82, D86
Click here to view the CV.
Click here to view the paper.
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PRESENTER
Wei He
The Chinese University of Hong Kong
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RESEARCH FIELDS
Microeconomic Theory
Game Theory
Mechanism Design
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DATE:
3 November 2022 (Thursday)
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TIME:
4pm - 5.30pm
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VENUE:
Meeting Room 5.1, Level 5
School of Economics
Singapore Management University
90 Stamford Road
Singapore 178903
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