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Monopolistic screening under learning by doing


Gärtner, D (2010). Monopolistic screening under learning by doing. RAND Journal of Economics, 41(3):574-597.

Abstract

This article investigates the design of incentives in a dynamic adverse selection framework where agents' production technologies display learning effects and agents' learning rates are private knowledge. In a simple two-period model with full commitment available to the principal, we show that whether learning effects are over- or underexploited crucially depends on whether more efficient agents also learn faster (so costs diverge through learning effects) or whether it is the less efficient agents who learn faster (so costs converge). We further show that an overexploitation of learning effects can occur also if the full-commitment assumption is relaxed.

Abstract

This article investigates the design of incentives in a dynamic adverse selection framework where agents' production technologies display learning effects and agents' learning rates are private knowledge. In a simple two-period model with full commitment available to the principal, we show that whether learning effects are over- or underexploited crucially depends on whether more efficient agents also learn faster (so costs diverge through learning effects) or whether it is the less efficient agents who learn faster (so costs converge). We further show that an overexploitation of learning effects can occur also if the full-commitment assumption is relaxed.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2010
Deposited On:21 Jan 2011 16:13
Last Modified:07 Dec 2017 05:33
Publisher:Wiley-Blackwell
ISSN:0741-6261
Additional Information:'The definitive version is available at www3.interscience.wiley.com'. The attached file is a preprint (accepted version) of an article published in RAND Journal of Economics.
Publisher DOI:https://doi.org/10.1111/j.1756-2171.2010.00112.x

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