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Screening with Congestion

CIRPEE Working Paper 12-39

36 Pages Posted: 18 Oct 2012 Last revised: 7 Dec 2014

Maxime Agbo

Université de Parakou

Marc Santugini

University of Virginia - Department of Economics

Jonathan W. Williams

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: April 27, 2014

Abstract

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.

Keywords: Congestion, Second-degree price discrimination, Screening

JEL Classification: D40, D62, D86, L14

Suggested Citation

Agbo, Maxime and Santugini, Marc and Williams, Jonathan W., Screening with Congestion (April 27, 2014). CIRPEE Working Paper 12-39. Available at SSRN: https://ssrn.com/abstract=2163154 or http://dx.doi.org/10.2139/ssrn.2163154

Maxime Agbo

Université de Parakou ( email )

CDE Rd
Parakou, BP 123
Benin

Marc Santugini (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

Jonathan Williams

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

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