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Overall Inefficiency and Cycles in Non-ordered Screening under Capacity Constraints and Standardization

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  • Kokovin Sergey
  • Zhelobodko Evgeniy

Abstract

We study discrete-type screening without Spence-Mirrlees condition. Under non-separable and non-concave cost, all packages can be distorted in equilibrium, even when only the participation constraints are active. This and other paradoxical effects, shown by examples, are caused by some kind of envy-cycles among agents. Theorem 1 proves that such effects are precluded under separable or concave cost, thus justifying the applicability of the standard screening model, which appears doubtful under more general costs.

Suggested Citation

  • Kokovin Sergey & Zhelobodko Evgeniy, 2008. "Overall Inefficiency and Cycles in Non-ordered Screening under Capacity Constraints and Standardization," EERC Working Paper Series 08/03e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:08/03e
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    References listed on IDEAS

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    1. Brito, Dagobert L, et al, 1990. "Pareto Efficient Tax Structures," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 61-77, January.
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    3. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
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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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