Abstract
A seller of an item faces a potential buyer whose valuation of the item depends on two private signals. It is well known that when there are informational externalities and the buyer’s private signals arrive all at once, it is impossible to implement an efficient sale. I show that if the buyer’s private signals arrive over time, then the seller can implement an efficient sale even in the presence of informational externalities. Specifically, I present a novel condition on the relationship between the buyer’s valuation and the social welfare that is necessary and sufficient for efficient sequential implementation.
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I am grateful to an anonymous associate editor and two anonymous referees for their helpful feedback and valuable comments. I also thank Alex Gershkov, Daniel Kr\({\ddot{\text {a}}}\)hmer, Ilan Kremer, Benny Moldovanu, Motty Perry, Phil Reny, Assaf Romm, and participants of various seminars for their suggestions. Funding by the German Research Foundation (DFG) through CRC TR 224 (Project B01) is gratefully acknowledged.
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Zik, B. Efficient sequential screening with informational externalities. Econ Theory 75, 567–590 (2023). https://doi.org/10.1007/s00199-022-01416-6
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DOI: https://doi.org/10.1007/s00199-022-01416-6
Keywords
- Efficient mechanisms
- Sequential screening
- Efficient privatization
- Interdependent valuations
- Multidimensional information
- Informational externalities