A Unified Approach to Second and Third Degree Price Discrimination

Dirk Bergemann, Tibor Heumann and Michael C. Wang
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Michael C. Wang: Yale University

No 2376, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations.

Pages: 33 pages
Date: 2024-01-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
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Working Paper: A Unified Approach to Second and Third Degree Price Discrimination (2024)
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