The Optimality of Coarse Menues

Title: The Optimality of Coarse Menues

Joint with Tibor Heumann (PUC Chile) and Stephen Morris (MIT)

Abstract: A fundamental question in the digital economy is how increasing information impacts profits and consumer welfare. We consider a general nonlinear pricing environment with private information.
We characterize the information structure of the buyer that maximizes the revenue of the seller. The seller who cannot observe the buyer’s willingness to pay can control both the signal that a buyer receives about his value and the selling mechanism.
The optimal selling mechanism is a menu with very few items, and frequently just a single item. Thus the socially efficient variety of items is decreased drastically at the expense of higher revenue and lower information rents.

About the speaker: Dirk Bergemann is Douglass and Marion Campbell Professor of Economics at Yale University. He has secondary appointments as Professor of Computer Science at the School of Engineering and Professor of Finance at the School of Management He received his Ph.D. in Economics from the University of Pennsylvania in 1994. Dirk Bergemann is the Chair of the Department of Economics since 2013 and Co‐Editor of Econometrica since 2014. He joined Yale in 1995 as an assistant professor, having previously served as a faculty member at Princeton University. He has been affiliated with the Cowles Foundation for Research in Economics at Yale since 1996 and a fellow of the Econometric Society since 2007. His research is in the area of game theory, contract theory and venture capital and mechanism design. His most recent work is in the area of dynamic mechanism design and dynamic pricing, robust mechanism design, and information design. His research has been supported by grants from the National Science Foundation, the Alfred P. Sloan Research Fellowship, Google Faculty Fellow and the German National Science Foundation.

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Zoom link: https://mit.zoom.us/j/95014828028