We study a buyer-seller setting where the seller's quality is private information and the buyer's reservation value depends on an unknown state. The seller can persuade the buyer by designing a costly Bayesian experiment. We show that a high-quality seller provides more precise information and is willing to incur higher costs, as this enables selling at higher prices. When information is costless, separation requires price distortion. By contrast, when experimentation is costly, the high-quality seller deters mimicking through a more informative experiment and sets prices optimally given the experiment design, thereby reducing the need for price distortion.
Carroni, E., Ferrari, L., Pignataro, G. (2025). Does costly persuasion signal quality?. INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION, 103(Part B), 1-15 [10.1016/j.ijindorg.2025.103205].
Does costly persuasion signal quality?
Elias Carroni;Giuseppe Pignataro
2025
Abstract
We study a buyer-seller setting where the seller's quality is private information and the buyer's reservation value depends on an unknown state. The seller can persuade the buyer by designing a costly Bayesian experiment. We show that a high-quality seller provides more precise information and is willing to incur higher costs, as this enables selling at higher prices. When information is costless, separation requires price distortion. By contrast, when experimentation is costly, the high-quality seller deters mimicking through a more informative experiment and sets prices optimally given the experiment design, thereby reducing the need for price distortion.| File | Dimensione | Formato | |
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carroni_pignataroIJIO-7.pdf
embargo fino al 16/10/2026
Tipo:
Postprint / Author's Accepted Manuscript (AAM) - versione accettata per la pubblicazione dopo la peer-review
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Licenza per Accesso Aperto. Creative Commons Attribuzione - Non commerciale - Non opere derivate (CCBYNCND)
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