Signalling by Bayesian Persuasion and Pricing Strategy

Bibliographic Data

ID9715968
AuthorsYanlin Chen (0000-0002-5850-6421, Nanjing Audit University), Jun Zhang (0000-0003-1706-1611, University of Technology Sydney, corresponding author)
Year2020
Volume130
Issue628
Pages976-1007
Publication date2020-05-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueaa002
OpenAlexW3034739460
LanguageEN
Citations received3
References cited35

This article investigates how a privately informed seller could signal her type through Bayesian persuasion and pricing strategy. We find that it is generally impossible to achieve separation through one channel alone. Furthermore, the outcome that survives the intuitive criterion always exists and is unique. This outcome is separating, for which a closed-form solution is provided. The signalling concern forces the high-type seller to disclose inefficiently more information and charge a higher price, resulting in fewer sales and lower profit. Finally, we show that a regulation on minimal quality could potentially hurt social welfare, and private information hurts the seller

Bayesian game · Bayesian probability · Channel (broadcasting · Computer security · Economics · Game theory · Information asymmetry · Microeconomics · Outcome (game theory · Persuasion · Private information retrieval · Profit (economics · Quality (philosophy · Repeated game · Signalling · Artificial Intelligence · Auction Theory and Applications · Computer Science · Experimental Behavioral Economics Studies · Game Theory and Applications · Psychology · Social Psychology

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