Non-Discriminatory Personalized Pricing

Philipp Strack and Kai Hao Yang
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Philipp Strack: Yale University
Kai Hao Yang: Yale University

No 2447, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A monopolist offers personalized prices to consumers with unit demand, heterogeneous values, and idiosyncratic costs, who differ in a protected characteristic, such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different characteristics must face identical prices. Such constraints arise in regulated markets like credit or insurance. The setting reduces to an optimal transport, and we characterize the optimal pricing rule. Under this rule, consumers may retain surplus, and either group may benefit. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group.

Pages: 88 pages
Date: 2025-06-26
New Economics Papers: this item is included in nep-mic
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