DP10036 Competitive Screening under Heterogeneous Information
|Author(s):||Daniel F Garrett, Renato Gomes, Lucas Maestri|
|Publication Date:||June 2014|
|Keyword(s):||adverse selection, competition, heterogeneous information, price discrimination, screening|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10036|
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.