In:
L'Actualité économique, Consortium Erudit, Vol. 63, No. 2-3 ( 2009-01-27), p. 98-117
Abstract:
We consider a service whose quality is variable and from which every consumer consumes either one unit or nothing. Production costs, both fixed and variable, do not depend on quality: a higher quality service is no more costly to produce than a lower quality one. On the consumption side however, higher quality is preferred: a consumer's willingness-to-pay for one unit of the service is an increasing and linear function of the service quality. A consumer's willingness-to-pay is private information to him, whereas the corresponding distribution over all consumers is public information, hence known to the producers. In this setting we investigate why and how producers might use price and quality discrimination. We show that a profit-maximising monopolist will not discriminate, whereas it is often the case that reaching a constrained Pareto optimum will not be possible without some recourse—which we precisely define—to discrimination: the improvement in welfare thus brought by self-selection is worth some waste of quality. In the last section we reformulate our model in order to include in the analysis such topics as network access pricing, selling strategies when buying is repeated, etc.
Type of Medium:
Online Resource
ISSN:
1710-3991
,
0001-771X
Language:
French
Publisher:
Consortium Erudit
Publication Date:
2009
detail.hit.zdb_id:
2140842-7
detail.hit.zdb_id:
2148265-2
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