Screening with Persuasion

We consider a general nonlinear pricing environment with private information. We characterize the information structure that maximizes the sellerís profits. The seller who cannot observe the buyerís willingness to pay can control both the signal that a buyer receives about his value and the selling mechanism. The optimal screening mechanism has finitely many items even with a continuum of types. We identify sufficient conditions under which the optimal mechanism has a single item. Thus, the socially efficient variety of items is decreased drastically at the expense of higher revenue and lower information rents.