Competitive Sequential Screening

Ian Ball, Deniz Kattwinkel and Jan Knoepfle

Papers from arXiv.org

Abstract: We study competition when firms contract with consumers before the consumers fully learn their product preferences. In a Hotelling duopoly, firms screen consumers by offering menus of option contracts. We characterize the unique equilibrium. Consumers select contracts from both firms. Each consumer is endogenously locked into the firm where he chooses the lower strike price, resulting in inefficient consumption. Yet competition is stiffer under earlier contracting because consumers are less informed and thus more homogeneous. Sufficiently early contracting raises consumer surplus relative to spot pricing -- reversing the ranking under monopoly. Exclusive contracting further increases consumer surplus by intensifying competition.

Date: 2026-02, Revised 2026-03
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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