The Limits of Price Discrimination

Dirk Bergemann, Benjamin Brooks and Stephen Morris

No 1896R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyze the welfare consequences of a monopolist having additional information about consumers' tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out "third degree price discrimination." We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.

Keywords: First degree price discrimination; Second degree price discrimination; Third degree price discrimination; Private information; Privacy; Bayes correlated equilibrium; Concavification (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2013-05, Revised 2014-04
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-mkt
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Related works:
Journal Article: The Limits of Price Discrimination (2015)
Working Paper: The Limits of Price Discrimination (2014)
Working Paper: The Limits of Price Discrimination (2013)
Working Paper: The Limits of Price Discrimination (2013)
Working Paper: The Limits of Price Discrimination (2013)
Working Paper: The Limits of Price Discrimination (2013)
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