Selling to a manager and a budget-constrained agent

Abstract

We analyze a model of selling a single object to a manager-agent pair who want to acquire the object for a firm. The manager and the agent have different assessments of the object’s value to the firm. The agent is budget-constrained while the manager is not. The agent participates in the mechanism, but she can (strategically) approach the manager for decision-making. We derive the revenue-maximizing mechanism in a two-dimensional type space (values of the agent and the manager). We show that below a threshold budget, a mechanism involving two posted prices and three outcomes (one of which involves randomization) is the optimal mechanism for the seller. Otherwise, a single posted price mechanism is optimal.