Abstract This paper studies the revenue‐maximizing selling mechanism with a continuum of buyers who have two‐dimensional private information: valuation and entry cost. Using optimal control methods, we solve this two‐dimensional screening problem with endogenous entry and derive sufficient conditions under which the optimal mechanism is a posted price. These conditions reduce the original problem to a one‐dimensional one in which a buyer's type is net valuation, and the optimal posted price matches that of the transformed environment. Finally, under mild conditions, revenue maximization implies underselling relative to the efficient allocation.
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Xin Feng
Jingfeng Lu
Economic Inquiry
National University of Singapore
Nanjing University of Finance and Economics
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Feng et al. (Tue,) studied this question.
www.synapsesocial.com/papers/69d893626c1944d70ce045d5 — DOI: https://doi.org/10.1111/ecin.70058