Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324268 
Year of Publication: 
2025
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 749
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
We study a dynamic game in which a monopolistic seller sequentially discloses information about a binary state to a consumer through priced experiments. The consumer privately observes a binary signal which influences her willingness to pay for information. We show that if buyer types favor different actions but their willingness to pay for a state-revealing test is sufficiently close, then the seller can commit to a sequence of priced experiments that extracts the entire surplus of both consumer types simultaneously. The optimal sequence of experiments is such that the high-valuation type assigns a higher probability to outcomes that trigger further information acquisition, thus creating a difference in expected costs. As a key element of the construction, we introduce an 'encryption protocol' under which the consumer faces a stopping problem. We then characterize situations in which the seller strictly benefits from a dynamic selling strategy when perfect price discrimination is not feasible. Finally, we illustrate our framework in the context of medical diagnostic testing, showing that a free test followed by a state-revealing test is often sufficient to improve revenue in comparison with a static approach.
Subjects: 
Information design
dynamic mechanism
selling information
encryption
price discrimination
JEL: 
D42
D81
D82
D83
C73
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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