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Diagnosing Efficiency of Distortion in Discrete Screening

Author

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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.

Suggested Citation

  • Kokovin Sergey & Zhelobodko Evgeniy, 2008. "Diagnosing Efficiency of Distortion in Discrete Screening," EERC Working Paper Series 08/02e, EERC Research Network, Russia and CIS.
  • Handle: RePEc:eer:wpalle:08/02e
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    References listed on IDEAS

    as
    1. 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.
    2. Michael L. Katz, 1983. "Non-uniform Pricing, Output and Welfare under Monopoly," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 37-56.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    4. Andersson, Tommy, 2005. "Profit maximizing nonlinear pricing," Economics Letters, Elsevier, vol. 88(1), pages 135-139, July.
    5. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    6. Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Package Sizes, Tariffs, Quantity Discount and Premium," General Economics and Teaching 0307002, EconWPA.
    7. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    8. Srinagesh, Padmanabhan & Bradburd, Ralph M, 1989. "Quality Distortion by a Discriminating Monopolist," American Economic Review, American Economic Association, vol. 79(1), pages 96-105, March.
    9. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 85(1), pages 77-96.
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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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