Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171080
Authors: 
Kwon, Suehyun
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6616
Abstract: 
This paper studies a selling mechanism where the seller first charges a fee for advice (information structure) then sells a product. When the buyer has no private information, the seller can extract full surplus, both when the seller has private information and when he doesn’t. If only the buyer has private information, the seller cannot extract full surplus. When both the seller and the buyer have private information, selling advice can strictly increase the probability of trade, and it is welfare-improving for both parties. In the private-value setting, Myerson-Satterthwaite no-trade theorem can be overcome by this mechanism. If the seller’s valuation doesn’t depend on the buyer type, then commitment power doesn’t change results, but with interdependent values, the limited-commitment solution cannot replicate the full-commitment solution.
Subjects: 
information design
dynamic informed-principal problem
interdependent values
limited commitment
Myerson-Satterthwaite
Document Type: 
Working Paper

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