Competitive Screening Under Heterogeneous Information

71 Pages Posted: 25 Sep 2014

See all articles by Daniel Ferguson Garrett

Daniel Ferguson Garrett

University of Toulouse 1 - Toulouse School of Economics (TSE)

Renato D. Gomes

Northwestern University - Department of Economics

Lucas Maestri

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: June 2014

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.

Keywords: adverse selection, competition, heterogeneous information, price discrimination, screening

JEL Classification: D82

Suggested Citation

Garrett, Daniel Ferguson and Gomes, Renato D. and Maestri, Lucas, Competitive Screening Under Heterogeneous Information (June 2014). CEPR Discussion Paper No. DP10036, Available at SSRN: https://ssrn.com/abstract=2501508

Daniel Ferguson Garrett (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Renato D. Gomes

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
773 852 7196 (Phone)

HOME PAGE: http://sites.google.com/site/northwesternrenatogomes/

Lucas Maestri

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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