Gatekeeping, Selection, and Welfare
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arXiv
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| Main Authors: | , |
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| Format: | Preprint |
| Published: |
2025
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| Subjects: | |
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| _version_ | 1866911415239966720 |
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| author | Del Prato, Francesco Zacchia, Paolo |
| author_facet | Del Prato, Francesco Zacchia, Paolo |
| contents | We study staged entry with costly gatekeeping in a differentiated-products economy: entrepreneurs observe noisy signals before paying a resource-intensive activation cost. Precision improves selection but requires more resources, reducing entry and variety: welfare need not rise with precision. Under CES preferences, the activation cutoff is efficient as profit displacement offsets the consumer-surplus gain from variety. Welfare losses arise from verification costs shrinking the feasible set of varieties, not from misaligned incentives. Because the market responds efficiently to any given regime, these losses cannot be corrected via Pigouvian taxes. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2505_24460 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Gatekeeping, Selection, and Welfare Del Prato, Francesco Zacchia, Paolo General Economics Economics We study staged entry with costly gatekeeping in a differentiated-products economy: entrepreneurs observe noisy signals before paying a resource-intensive activation cost. Precision improves selection but requires more resources, reducing entry and variety: welfare need not rise with precision. Under CES preferences, the activation cutoff is efficient as profit displacement offsets the consumer-surplus gain from variety. Welfare losses arise from verification costs shrinking the feasible set of varieties, not from misaligned incentives. Because the market responds efficiently to any given regime, these losses cannot be corrected via Pigouvian taxes. |
| title | Gatekeeping, Selection, and Welfare |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2505.24460 |