Welfare of Price Discrimination and Market Segmentation in Duopoly

Xianwen Shi and Jun Zhang

Working Papers from University of Toronto, Department of Economics

Abstract: We study welfare consequences of third-degree price discrimination and market segmentation in a duopoly market with captive and contested consumers. A market segmentation divides the market into segments that contain different proportions of captive and contested consumers. Firm-optimal segmentation divides the market into two segments and in each segment only one firm has captive consumers. In contrast to the existing literature with exogenous segmentation, price discrimination under firm-optimal segmentation unambiguously reduces consumer surplus for all markets. Consumer-optimal segmentation divides the market into a maximal symmetric segment and the remainder, and yields the lowest producer surplus among all segmentations.

Keywords: Price Discrimination; Market Segmentation; Information Design; Welfare (search for similar items in EconPapers)
JEL-codes: D43 D82 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2020-12-25
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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