SCREENING IN SPACE: RICH AND POOR CONSUMERS IN A LINEAR CITY
Unlike standard models of monopolistic screening (second-degree price discrimination), we consider a situation where consumers are heterogeneous not only vertically, in their willingness to pay, but also horizontally, in their tastes or "addresses'' a la Hotelling's Linear City....
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Ural Branch of the Russian Academy of Sciences and Ural Federal University named after the first President of Russia B.N.Yeltsin, Krasovskii Institute of Mathematics and Mechanics
2021-07-01
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| Series: | Ural Mathematical Journal |
| Subjects: | |
| Online Access: | https://umjuran.ru/index.php/umj/article/view/376 |
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| Summary: | Unlike standard models of monopolistic screening (second-degree price discrimination), we consider a situation where consumers are heterogeneous not only vertically, in their willingness to pay, but also horizontally, in their tastes or "addresses'' a la Hotelling's Linear City. For such a screening game, a novel model is composed. We formulate the game as an optimization program, prove the existence of equilibria, develop a method to calculate equilibria, and characterize their properties. Namely, the solution structure of the resulting menu of contracts can be either a "chain of envy'' like in usual screening or a number of disconnected chains. Unlike usual screening, "almost all'' consumers get positive informational rent. Importantly, the model can be extended to oligopoly screening. |
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| ISSN: | 2414-3952 |