Events

Mr. Tan Gan
Ph.D. candidate in Economics
Department of Economics, Yale University

An informed seller designs a dynamic mechanism to sell an experience good. The
seller has partial information about the product match, which affects the buyer’s private
consumption experience. We characterize equilibrium mechanisms of this dynamic
informed principal problem. The belief gap between the informed seller and the uninformed
buyer, coupled with the buyer’s learning, gives rise to mechanisms that provide
the skeptical buyer with limited access to the product and an option to upgrade if the
buyer is swayed by a good experience. Depending on the seller’s screening technology,
this takes the form of free/discounted trials or tiered pricing, which are prevalent in
digital markets. In contrast to static environments, having consumer data can reduce
sellers’ revenue in equilibrium, as they fine-tune the dynamic design with their data
forecasting the buyer’s learning process.