Tuesday, May 25, 2010
Posted by D. Daniel Sokol
Paulo Barelli (University of Rochester; Insper Institute of Education and Research), Suren Basov (La Trobe University), Mauricio Bugarin, and Ian Paul King (University of Melbourne) explain The Inclusiveness of Exclusion.
ABSTRACT: We extend Armstrong’s (1996) result on exclusion in multi-dimensional screening models in two key ways, providing support for the view that this result is quite generic and applicable to many different markets. First, we relax the strong technical assumptions he imposed on preferences and consumer types. Second, we extend the result beyond the monopolistic market structure to generalized oligopoly settings with entry. We also analyse applications to several quite different settings: credit markets, automobile industry, research grants, the regulation of a monopolist with unknown demand and cost functions, and involuntary unemployment in the labor market.