IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/10036.html
   My bibliography  Save this paper

Competitive Screening under Heterogeneous Information

Author

Listed:
  • Gomes, Renato
  • Maestri, Lucas
  • Garrett, Daniel

Abstract

We study competition in price-quality menus when consumers privately know their valuation for quality (type), and are heterogeneously informed about the offers available in the market. While firms are ex-ante identical, the menus offered in equilibrium are ordered so that more generous menus leave more surplus uniformly over types. More generous menus provide quality more efficiently, serve a larger range of consumers, and generate a greater fraction of profits from sales of low-quality goods. By varying the mass of competing firms, or the level of informational frictions, we span the entire spectrum of competitive intensity, from perfect competition to monopoly.

Suggested Citation

  • Gomes, Renato & Maestri, Lucas & Garrett, Daniel, 2014. "Competitive Screening under Heterogeneous Information," CEPR Discussion Papers 10036, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10036
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP10036
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lars A. Stole, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-562, December.
    2. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
    3. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
    4. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    5. Babur De Los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2012. "Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior," American Economic Review, American Economic Association, vol. 102(6), pages 2955-2980, October.
    6. Jean-Charles Rochet & Lars A. Stole, 2002. "Nonlinear Pricing with Random Participation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 277-311.
    7. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    8. Draganska, Michaela & Klapper, Daniel, 2010. "Choice Set Heterogeneity and the Role of Advertising: An Analysis with Micro and Macro Data," Research Papers 2063, Stanford University, Graduate School of Business.
    9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    10. repec:adr:anecst:y:1994:i:34:p:03 is not listed on IDEAS
    11. Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: Search frictions and competing mechanisms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1354-1385, July.
    12. Severin Borenstein, 1985. "Price Discrimination in Free-Entry Markets," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 380-397, Autumn.
    13. , & ,, 2008. "Nonlinear pricing, market coverage, and competition," Theoretical Economics, Econometric Society, vol. 3(1), March.
    14. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roland Bénabou & Jean Tirole, 2016. "Bonus Culture: Competitive Pay, Screening and Multitasking," Post-Print hal-04527031, HAL.
    2. Atabek Atayev, 2021. "Nonlinear Prices, Homogeneous Goods, Search," Papers 2109.15198, arXiv.org.
    3. Guido Menzio & Nicholas Trachter, 2018. "Equilibrium Price Dispersion Across and Within Stores," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 205-220, April.
    4. Garrett, Daniel & Gomes, Renato & Maestri, Lucas, 2021. "Oligopoly under incomplete information: On the welfare effects of price discrimination," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    5. Gomes, Renato & Lozachmeur, Jean-Marie & Maestri, Lucas, 2022. "Nonlinear Pricing in Oligopoly: How Brand Preferences Shape Market Outcomes," TSE Working Papers 22-1326, Toulouse School of Economics (TSE).
    6. Natalia Fabra & Juan-Pablo Montero, 2022. "Product Lines and Price Discrimination in Markets with Information Frictions," Management Science, INFORMS, vol. 68(2), pages 981-1001, February.
    7. Lu, Jingfeng & Wang, Zijia, 2021. "Optimal selling mechanisms with buyer price search," Journal of Economic Theory, Elsevier, vol. 196(C).
    8. Bannier, Christina E. & Feess, Eberhard & Packham, Natalie, 2014. "Incentive schemes, private information and the double-edged role of competition for agents," CFS Working Paper Series 475, Center for Financial Studies (CFS).
    9. Christina E. Bannier & Eberhard Feess & Natalie Packham & Markus Walzl, 2021. "Differentiation and Risk Aversion in Imperfectly Competitive Labor Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 177(1), pages 1-27.
    10. Groh, Carl-Christian, 2023. "Search, Data, and Market Power," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277701, Verein für Socialpolitik / German Economic Association.
    11. Roland Bénabou & Jean Tirole, 2016. "Bonus Culture: Competitive Pay, Screening, and Multitasking," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 305-370.
    12. Renato Gomes & Jean-Marie Lozachmeur & Lucas Maestri, 2022. "Nonlinear Pricing in Oligopoly: How Brand Preferences Shape Market Outcomes," Working Papers hal-03629496, HAL.
    13. Atayev, Atabek, 2021. "Nonlinear prices, homogeneous goods, search," ZEW Discussion Papers 21-092, ZEW - Leibniz Centre for European Economic Research.
    14. Daniel F. Garrett & Renato Gomes & Lucas Maestri, 2021. "Oligopoly under incomplete information: on the welfare effects of price discrimination," Post-Print hal-03515749, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    2. Gihwan Yi & Min Kim & Hoe Sang Chung, 2024. "The Revenue Impact of Differential Seat Pricing and Competition in the Movie Theater Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 361-382, May.
    3. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009. "Competition and price discrimination in the market for mailing lists," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 147-179, June.
    4. Ye, Lixin & Zhang, Chenglin, 2017. "Monopolistic nonlinear pricing with consumer entry," Theoretical Economics, Econometric Society, vol. 12(1), January.
    5. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    6. Marc Möller & Makoto Watanabe, 2016. "Competition in the presence of individual demand uncertainty," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 273-292, May.
    7. Fabian Herweg, 2012. "Relaxing competition through quality differentiation and price discrimination," Journal of Economics, Springer, vol. 106(1), pages 1-26, May.
    8. Bonatti, Alessandro, 2011. "Brand-specific tastes for quality," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 562-575, September.
    9. Haizhen Lin & Yijia Wang, 2012. "Competition and Price Discrimination in the Parking Garage Industry," Working Papers 2012-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    10. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2011. "Second-degree Price Discrimination and Inter-group Effects in Airline Routes between European Cities," Tinbergen Institute Discussion Papers 11-118/3, Tinbergen Institute.
    11. Giaume, Stephanie & Guillou, Sarah, 2004. "Price discrimination and concentration in European airline markets," Journal of Air Transport Management, Elsevier, vol. 10(5), pages 305-310.
    12. Hector Chade & Jeroen Swinkels, 2021. "Screening in Vertical Oligopolies," Econometrica, Econometric Society, vol. 89(3), pages 1265-1311, May.
    13. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, September.
    14. Khaled Diaw & Jérôme Pouyet, 2005. "Information, competition and (In) complete discrimination," Working Papers hal-00243025, HAL.
    15. Jian Shen & Huanxing Yang & Lixin Ye, 2016. "Competitive Nonlinear Pricing and Contract Variety," Journal of Industrial Economics, Wiley Blackwell, vol. 64(1), pages 64-108, March.
    16. Atabek Atayev, 2021. "Nonlinear Prices, Homogeneous Goods, Search," Papers 2109.15198, arXiv.org.
    17. Koji Ishibashi, 2024. "Biased Beliefs of Consumers and Two-Part Tariff Competition," Keio-IES Discussion Paper Series 2024-009, Institute for Economics Studies, Keio University.
    18. Anindya Ghose & Ke‐Wei Huang, 2009. "Personalized Pricing and Quality Customization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1095-1135, December.
    19. Eugenio J. Miravete, 2009. "Competing with Menus of Tariff Options," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 188-205, March.
    20. Natalia Fabra & Juan-Pablo Montero, 2022. "Product Lines and Price Discrimination in Markets with Information Frictions," Management Science, INFORMS, vol. 68(2), pages 981-1001, February.

    More about this item

    Keywords

    Adverse selection; Competition; Heterogeneous information; Price discrimination; Screening;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:10036. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.