Abstract:

We characterize profit-maximizing menus in screening settings in which the agent has one of two privately-known types. We assume that utilities are quasi-linear but impose no other restrictions (such as increasing differences) on the agent's utility or the set of alternatives. Our characterization clarifies the role of increasing differences in the standard setting and shows when random menus are beneficial. We describe applications to vertical and horizontal differentiation and multi-product bundling.

For further information please contact: erika.somma@unibocconi.it