Sergey Kokovin     (HSE University, 3a Kantemirovskaya str., St. Petersburg, 19410, Russian Federation)
Fedor Vasilev     (HSE University, 3a Kantemirovskaya str., St. Petersburg, 19410, Russian Federation)


Unlike standard models of monopolistic screening (second-degree price discrimination), we consider a situation where consumers are heterogeneous not only vertically, in their willingness to pay, but also horizontally, in their tastes or "addresses'' a la Hotelling's Linear City. For such a screening game, a novel model is composed. We formulate the game as an optimization program, prove the existence of equilibria, develop a method to calculate equilibria, and characterize their properties. Namely, the solution structure of the resulting menu of contracts can be either a "chain of envy'' like in usual screening or a number of disconnected chains. Unlike usual screening, "almost all'' consumers get positive informational rent. Importantly, the model can be extended to oligopoly screening.


Screening, Price discrimination, Spatial competition, Linear city, Principal-Agent model, Non-convex optimization

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