Screening with Persuasion

Stephen Morris (Massachusetts Institute of Technology)

March 28, 2023, 11:00–12:30


Room Auditorium 3

Economic Theory Seminar


We consider a general nonlinear pricing environment with private information. The seller can control both the signal that the buyers receive about their value and the selling mechanism. We characterize the optimal menu and information structure that jointly maximize the seller's profits. The optimal screening mechanism has finitely many items even with a continuum of values. We identify sufficient conditions under which the optimal mechanism has a single item. Thus the seller decreases the variety of items below the effcient level as a by-product of reducing the information rents of the buyer.