Information Acquisition and Price Discrimination

Farshad Fatemi

MPRA Paper from University Library of Munich, Germany

Abstract: We consider a Hotelling model of price competition where firms may acquire costly information regarding the preferences (i.e. “location”) of customers. By purchasing additional information, a firm has a finer partition regarding customer preferences, and its pricing decisions must be measurable with respect to this partition. If information acquisition decisions are common knowledge at the point where firms compete via prices, we show that a pure strategy subgame perfect equilibrium exists, and that there is “excess information acquisition” from the point of view of the firms. If information acquisition decisions are private information, a pure strategy equilibrium fails to exist. We compute a mixed strategy equilibrium for a range of parameter values.

Keywords: Information Acquisition; Price Discrimination (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 (search for similar items in EconPapers)
Date: 2010-01-30
New Economics Papers: this item is included in nep-bec, nep-com and nep-cta
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20399

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