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Reversals in Per-Unit Pass-Through in a Screening Model of Monopolistic Nonlinear Pricing

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  • Takanori ADACHI

Abstract

We examine per-unit cost pass-through in a two-type screening model of monopolistic nonlinear pricing. We show that per-unit pass-through for the small package is necessarily positive when the low type’s participation constraint binds. Under isoelastic preferences, pass-through is higher for the small package than for the large package. This ranking, however, is not a general implication of screening. We derive a local curvature condition governing the pass-through gap and show that shifted-isoelastic preferences can reverse the ranking. A numerical illustration demonstrates that such reversals can also occur away from the local limit. Thus, screening restricts the sign of per-unit pass-through at the bottom of the menu, but not its ranking across contracts.

Suggested Citation

  • Takanori ADACHI, 2026. "Reversals in Per-Unit Pass-Through in a Screening Model of Monopolistic Nonlinear Pricing," Discussion papers e-26-004, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-26-004
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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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