A monopolist facing a market of heterogeneous consumers will distort quality array. In typical Self-Selection models, the monopolist deteriorates the quality offered to consumers with low willingness-to-pay for quality, but not consumers with high willingness-to-pay for quality. But, this direction of distortion arises on the restrictive assumption that no interdependency between the quality-differentiated products.
In this thesis, we consider the interdependency between cost functions and that between consumer's utilities. On these assumptions, the direction of distortion differs from the standard results.
