Garrett, Daniel F., Gomes, Renato and Maestri, Lucas (2016) Competitive Screening under Heterogeneous Information. , Toulouse

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Abstract

We build a theory of second-degree price discrimination under imperfect competition that allows us to study the substitutive role of prices and qualities in increasing sales. A key feature of our model is that consumers are heterogeneously informed about the o↵ers available in the market, which leads to dispersion over price-quality menus in equilibrium. While firms are ex-ante identical, their menus are ordered so that more generous menus leave more surplus uniformly over consumer types. We generate empirical predictions by exploring the e↵ects of changes in market fundamentals on the distribution of surplus across types, and pricing across products. For instance, more competition may raise prices for low-quality goods; yet, consumers are better o↵, as the qualities they receive also increase. The predictions of our model illuminate empirical findings in many markets, such as those for cell phone plans, yellow-pages advertising, cable TV and air travel.

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• Competitive Screening under Heterogeneous Information. (deposited 03 May 2018 14:09) [Currently Displayed]
  • Competitive Screening under Heterogeneous Information. (deposited 26 Nov 2018 11:57)