Screening when some agents are nonstrategic: does a monopoly need to exclude?

We characterize the optimal screening mechanism for a monopolist facing consumers with privately known demands, some of whom have limited abilities to misrepresent their preferences. We show that consumers with better abilities to misrepresent information benefit from the presence of consumers who l...

Full description

Saved in:
Bibliographic Details
Published in:The Rand journal of economics 2006-12, Vol.37 (4), p.816-840
Main Authors: Severinov, Sergei, Deneckere, Raymond
Format: Article
Language:English
Subjects:
Bounded rationality
Business strategies
Consumer attitudes
Consumer behavior
Consumer economics
Consumer information
Consumer profiles
Consumers
Customers
Demand functions
Economic theory
Exclusion of members
Imperfect competition
Industrial organization
Marginal costs
Market strategy
Monopolies
Monopolistic competition
Pricing policies
Studies
Tariffs
Valuation
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We characterize the optimal screening mechanism for a monopolist facing consumers with privately known demands, some of whom have limited abilities to misrepresent their preferences. We show that consumers with better abilities to misrepresent information benefit from the presence of consumers who lack such abilities. Whenever the fraction of the latter group is positive, there is no exclusion: the firm supplies a positive quantity of the good to all consumers whose valuations exceed marginal cost of production. Our analysis is motivated by the evidence indicating that some individuals have limited ability to misrepresent themselves and imitate others.
ISSN:0741-6261
1756-2171
DOI:10.1111/j.1756-2171.2006.tb00059.x