Our Seminars & Workshops

Title: Screening in digital monopolies (with Pietro Dall'Ara (CSEF and Università di Napoli Federico II)) 

Abstract: A defining feature of digital goods is that damaging and replication are costless: once a high-quality good is produced, lower-quality versions can be created and distributed at no additional cost. This paper studies screening in markets for digital goods. Unlike in nonlinear pricing à la Mussa and Rosen (1978), production costs only depend on the highest quality supplied and are not separable across delivered qualities. A new productive inefficiency emerges: the monopolist underinvests in the highest quality compared to the efficiency benchmark. As a result, the standard “efficiency at the top”

result is weakened to distributional efficiency. The welfare comparison between monopoly and competition is ambiguous: while competition exacerbates productive inefficiency, it improves on monopoly in terms of distributional efficiency.