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Diagnosing Efficiency of Distortion in Discrete Screening

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  • Kokovin Sergey

    ()

  • Zhelobodko Evgeniy

    ()

Abstract

We study the screening or nonlinear pricing for discrete consumer types when the single-crossing condition need not hold. A method is developed to reveal social eff±ciency or distortion of equilibria from market observations. The two known indicators of effciency, namely absence of almost-envy by a consumer for other consumer's package; or per-package profit similarity, are extended. The third, empirically more useful, new crite rion is based on demand parametrization, observed tariffs, package sizes, and some approximate estimate of marginal cost. Application of this criterion to several consumer goods shows existence of overall effciency or oversized packages in reality, both contradicting Spence-Mirrlees condition. The methodological contribution is elaborating 'envy-graph” notions to desribe solution structures.

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Bibliographic Info

Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 08/02e.

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Date of creation: 06 Nov 2008
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Handle: RePEc:eer:wpalle:08/02e

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  1. Guesnerie Roger & Seade Jesus, 1981. "Nonlinear pricing in a finite economy," CEPREMAP Working Papers (Couverture Orange) 8118, CEPREMAP.
  2. Srinagesh, P. & Bradburd, R.M., 1988. "Quality Distorsion By A Discriminating Monopolist," Department of Economics Working Papers 117, Department of Economics, Williams College.
  3. Andersson, Tommy, 2005. "Profit maximizing nonlinear pricing," Economics Letters, Elsevier, vol. 88(1), pages 135-139, July.
  4. Oi, Walter Y, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 85(1), pages 77-96, February.
  5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  6. Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Package Sizes, Tariffs, Quantity Discount and Premium," General Economics and Teaching 0307002, EconWPA.
  7. Katz, Michael L, 1983. "Non-Uniform Pricing, Output and Welfare under Monopoly," Review of Economic Studies, Wiley Blackwell, vol. 50(1), pages 37-56, January.
  8. Gerstner, Eitan & Hess, James D, 1987. "Why Do Hot Dogs Come in Packs of 10 and Buns in 8s or 12s? A Demand-Side Investigation," The Journal of Business, University of Chicago Press, vol. 60(4), pages 491-517, October.
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