The traditional theory of monopolistic screening tackles individual
self-selection but does not address the possibility that buyers could
form a coalition to coordinate their purchases and to reallocate the
goods. In this paper, we design the optimal sale mechanism which takes
into account both individual and coalition incentive compatibility
focusing on the role of asymmetric information among buyers. We show
that when a coalition of buyers is formed under asymmetric information,
the monopolist ...
The traditional theory of monopolistic screening tackles individual
self-selection but does not address the possibility that buyers could
form a coalition to coordinate their purchases and to reallocate the
goods. In this paper, we design the optimal sale mechanism which takes
into account both individual and coalition incentive compatibility
focusing on the role of asymmetric information among buyers. We show
that when a coalition of buyers is formed under asymmetric information,
the monopolist can do as well as when there is no coalition. Although in
the optimal sale mechanism marginal rates of substitution are not
equalized across buyers (hence there exists room for arbitrage), they
fail to realize the gains from arbitrage because of the transaction costs
in coalition formation generated by asymmetric information.
+
