Events

Professor Zhuoran Lu
Department of Economics
Shanghai Jiao Tong University

This paper studies competitive nonlinear pricing for signaling goods. Multiple sellers choose price schemes for horizontally differentiated products, and a buyer chooses which seller to purchase from and, if so, how much, as a signal to receivers. We characterize the seller-optimal symmetric equilibrium across different market structures. When the sellers act as a monopolist, the market is partially covered, and quantities are distorted downward when the degree of horizontal differentiation is low. As horizontal differentiation increases, market coverage expands, equilibrium quantities increase, and the downward distortion diminishes. When differentiation becomes sufficiently high, the monopolistic allocation can attain the first-best outcome for an intermediate level of signaling intensity; for higher signaling intensities, however, quantities may become distorted upward at the lower end of the market. This outcome contrasts with the typical downward distortion under optimal pricing for non-signaling goods. When the market structure shifts from monopoly to oligopoly, both market coverage and equilibrium quantities increase, and the buyer obtains higher utility. Moreover, upward distortion may occur at the high end of the market when signaling intensity is sufficiently high.