Diagnosing Efficiency of Distortion in Discrete Screening

Sergey Kokovin and Evgeny Zhelobodko

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: We study the screening or nonlinear pricing for discrete consumer types when the single-crossing condition need not hold. A method is developed to reveal social eff±ciency or distortion of equilibria from market observations. The two known indicators of effciency, namely absence of almost-envy by a consumer for other consumer's package; or per-package profit similarity, are extended. The third, empirically more useful, new crite rion is based on demand parametrization, observed tariffs, package sizes, and some approximate estimate of marginal cost. Application of this criterion to several consumer goods shows existence of overall effciency or oversized packages in reality, both contradicting Spence-Mirrlees condition. The methodological contribution is elaborating 'envy-graph” notions to desribe solution structures.

JEL-codes: D42 D82 L10 L12 L40 (search for similar items in EconPapers)
Date: 2008-11-06
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