Screening-Based Competition

28 Pages Posted: 19 Mar 2013

See all articles by Thomas Gehrig

Thomas Gehrig

University of Vienna

Rune Stenbacka

Hanken School of Economics

Date Written: March 2013

Abstract

We apply a reduced form representation of product market competition, facilitating an explicit characterization of the equilibrium investments in consumer-specific screening. The effects of market structure on screening incentives depend on the microstructure of the imperfect screening technology and on the characteristics of the pool of consumers. We conduct a welfare analysis, which reveals that the microstructure of the screening technology and the characteristics of the pool of consumers determine whether there are private incentives for overinvestment or underinvestment in screening. Furthermore, we show that the introduction of screening competition amplifies market failures associated with screening investments.

Keywords: imperfect competition, imperfect screening

JEL Classification: D43, L15

Suggested Citation

Gehrig, Thomas and Stenbacka, Rune, Screening-Based Competition (March 2013). CEPR Discussion Paper No. DP9397, Available at SSRN: https://ssrn.com/abstract=2235495

Thomas Gehrig (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
Arkadiankatu 22
Helsinki, Helsinki 00101
Finland

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