Consumer Sorting of Vertically Differentiated Goods
7 Pages Posted: 1 Jul 2010 Last revised: 29 Jul 2010
Date Written: June 28, 2010
This paper shows the conditions for consumer sorting to be profitable. Sorting of low quality goods dampens their substitutability with high quality goods and can raise firm's profit even when sorting lowers profit from low quality sales considered alone.
Keywords: Consumer sorting, Adverse selection, Vertical differentiation
JEL Classification: D43, L13
Suggested Citation: Suggested Citation