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Screening-Based Competition

Author

Listed:
  • Gehrig, Thomas
  • Stenbacka, Rune

Abstract

We apply a reduced form representation of product market competition, facilitating an explicit characterization of the equilibrium investments in consumer-specific screening. The effects of market structure on screening incentives depend on the microstructure of the imperfect screening technology and on the characteristics of the pool of consumers. We conduct a welfare analysis, which reveals that the microstructure of the screening technology and the characteristics of the pool of consumers determine whether there are private incentives for overinvestment or underinvestment in screening. Furthermore, we show that the introduction of screening competition amplifies market failures associated with screening investments.

Suggested Citation

  • Gehrig, Thomas & Stenbacka, Rune, 2013. "Screening-Based Competition," CEPR Discussion Papers 9397, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9397
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    References listed on IDEAS

    as
    1. Rosa-Branca Esteves, 2014. "Price Discrimination with Private and Imperfect Information," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(3), pages 766-796, July.
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    More about this item

    Keywords

    imperfect competition; imperfect screening;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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