Consumer benefits differ for changing product sizes in a specialty coffee market

When consumers hold private information about their tastes, companies can use nonlinear pricing as a screening mechanism to induce different types of customers to buy different products. Screening incentives may lead a firm to make a small version of its product "too small" in order to collect more profit from consumers who purchase the larger version. A study in the RAND Journal of Economics shows that firms distort the products.

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