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Screening with Congestion


  • Maxime Agbo
  • Marc Santugini
  • Jonathan W. Williams


We study the effect of congestion on monopoly second-degree price discrimination. We provide three results. First, with congestion, the firm does not always provide distinct contracts (i.e., it is not always optimal to price discriminate) and it is more likely for the low-valuation buyer to be excluded. Second, the presence of congestion implies that no buyer receives an efficient allocation. In particular, the high-valuation buyer might be offered a higher or a lower quality (relative to the first-degree price discrimination offer). Finally, congestion might be beneficial to buyers. Specifically, for values of the parameters for which all types are serviced, consumer surplus under second-degree price discrimination may be greater than consumer surplus under no price discrimination.

Suggested Citation

  • Maxime Agbo & Marc Santugini & Jonathan W. Williams, 2012. "Screening with Congestion," Cahiers de recherche 1239, CIRPEE.
  • Handle: RePEc:lvl:lacicr:1239

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    References listed on IDEAS

    1. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-247, March.
    2. Austan Goolsbee & Peter J. Klenow, 2006. "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet," American Economic Review, American Economic Association, vol. 96(2), pages 108-113, May.
    3. Anja Lambrecht & Katja Seim & Bernd Skiera, 2007. "Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs," Marketing Science, INFORMS, vol. 26(5), pages 698-710, 09-10.
    4. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
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    More about this item


    Congestion; Second-degree price discrimination; Screening;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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