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Monopolistic screening under learning by doing

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  • Dennis L. Gärtner

Abstract

This article investigates the design of incentives in a dynamic adverse selection framework where agents' production technologies display learning effects and agents' learning rates are private knowledge. In a simple two-period model with full commitment available to the principal, we show that whether learning effects are over- or underexploited crucially depends on whether more efficient agents also learn faster (so costs diverge through learning effects) or whether it is the less efficient agents who learn faster (so costs converge). We further show that an overexploitation of learning effects can occur also if the full-commitment assumption is relaxed. Copyright (c) 2010, RAND.

Suggested Citation

  • Dennis L. Gärtner, 2010. "Monopolistic screening under learning by doing," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 574-597.
  • Handle: RePEc:bla:randje:v:41:y:2010:i:3:p:574-597
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    Cited by:

    1. Ilja Neustadt & Peter Zweifel, 2009. "Economic Well-Being, Social Mobility, and Preferences for Income Redistribution: Evidence from a Discrete Choice Experiment," SOI - Working Papers 0909, Socioeconomic Institute - University of Zurich, revised Jan 2010.
    2. Gersbach, Hans & Schmutzler, Armin, 2001. "A Product Market Theory of Worker Training," IZA Discussion Papers 327, Institute for the Study of Labor (IZA).
    3. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.
    4. Dennis L. Gärtner, 2010. "Monopolistic screening under learning by doing," RAND Journal of Economics, RAND Corporation, pages 574-597.
    5. Maurus Rischatsch, 2009. "Simulating WTP Values from Random-Coefficient Models," SOI - Working Papers 0912, Socioeconomic Institute - University of Zurich.
    6. Gärtner, Dennis L. & Halbheer, Daniel, 2009. "Are there waves in merger activity after all?," International Journal of Industrial Organization, Elsevier, pages 708-718.
    7. Polk, Andreas & Schmutzler, Armin, 2005. "Lobbying against environmental regulation vs. lobbying for loopholes," European Journal of Political Economy, Elsevier, pages 915-931.
    8. Alessandro Bonatti, 2011. "Menu Pricing and Learning," American Economic Journal: Microeconomics, American Economic Association, pages 124-163.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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