American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Screening Inattentive Buyers
American Economic Review
(pp. 1949–84)
Abstract
Information plays a crucial role in mechanism design problems. A potential complication is that buyers may be inattentive, and so their information may endogenously and flexibly depend on the offered mechanism. I show that it is without loss of generality to consider contour mechanisms, which comprise triplets of allocation probabilities, prices, and beliefs, and are uniquely determined by a single such point. The mechanism design problem then reduces to Bayesian persuasion along the optimal contour. This reduction has significant implications for both the implementation of the optimal mechanism and the revenues that can be achieved.Citation
Mensch, Jeffrey. 2022. "Screening Inattentive Buyers." American Economic Review 112 (6): 1949–84. DOI: 10.1257/aer.20201098Additional Materials
JEL Classification
- C11 Bayesian Analysis: General
- D11 Consumer Economics: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness