Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: We characterize profit-maximizing menus in a screening setting 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.

Written with Ron Siegel.