Can Buyers Reveal for a Better Deal?

TL;DR

This paper explores how partial information revelation by buyers affects market outcomes, revealing that strategies beneficial in single-buyer scenarios may harm buyer welfare in multi-buyer settings, with implications for social efficiency and computational complexity.

Contribution

It demonstrates that buyer signaling schemes beneficial in single-buyer cases can be harmful in multi-buyer markets and establishes complexity results for optimizing buyer utility.

Findings

Buyer signaling can harm welfare in multi-buyer markets.

Maximizing buyer utility is NP-hard even with one buyer and one good.

Impossibility results show trade-offs between buyer utility and social efficiency.

Abstract

We study market interactions in which buyers are allowed to credibly reveal partial information about their types to the seller. Previous recent work has studied the special case of one buyer and one good, showing that such communication can simultaneously improve social welfare and ex ante buyer utility. However, with multiple buyers, we find that the buyer-optimal signalling schemes from the one-buyer case are actually harmful to buyer welfare. Moreover, we prove several impossibility results showing that, with either multiple i.i.d. buyers or multiple i.i.d. goods, maximizing buyer utility can be at odds with social efficiency, which is surprising in contrast with the one-buyer, one-good case. Finally, we investigate the computational tractability of implementing desirable equilibrium outcomes. We find that, even with one buyer and one good, optimizing buyer utility is generally NP-hard but tractable in a practical restricted setting.