Reversals in Per-Unit Pass-Through in a Screening Model of Monopolistic Nonlinear Pricing

Takanori Adachi

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: We examine per-unit cost pass-through in a two-type screening model of monopolistic nonlinear pricing. We show that per-unit pass-through for the small package is necessarily positive when the low type’s participation constraint binds. Under isoelastic preferences, pass-through is higher for the small package than for the large package. This ranking, however, is not a general implication of screening. We derive a local curvature condition governing the pass-through gap and show that shifted-isoelastic preferences can reverse the ranking. A numerical illustration demonstrates that such reversals can also occur away from the local limit. Thus, screening restricts the sign of per-unit pass-through at the bottom of the menu, but not its ranking across contracts.

Keywords: Pass-through; Nonlinear pricing; Screening. (search for similar items in EconPapers)
JEL-codes: D42 D82 H22 L11 (search for similar items in EconPapers)
Pages: 10
Date: 2026-10
New Economics Papers: this item is included in nep-com and nep-mic
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