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Sequential Screening

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  • Pascal Courty
  • Li Hao

Abstract

We study price discrimination where consumers know at the time of contracting only the distribution of their valuations but subsequently learn their actual valuations. Consumers are sequentially screened, as in a menu of refund contracts. Initial valuation uncertainty can differ in terms of first-order stochastic dominance or mean-preserving-spread. In both cases, optimal mechanisms depend on informativeness of consumers' initial knowledge about their valuations, not on uncertainty that affects all consumers. It can be optimal to "subsidize" consumers with smaller valuation uncertainty through low refund to reduce the rent to those who face greater uncertainty and purchase more "flexible" contracts.

Suggested Citation

  • Pascal Courty & Li Hao, 2000. "Sequential Screening," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 697-717.
  • Handle: RePEc:oup:restud:v:67:y:2000:i:4:p:697-717.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00150
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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