Optimal Second-Degree Price Discrimination and Arbitrage: On the Role of Asymmetric Information Among Buyers

Doh-Shin Jeon and Domenico Menicucci

RAND Journal of Economics, 2005, vol. 36, issue 2, 337-360

Abstract: The traditional theory of second-degree price discrimination tackles individual self-selection but does not address the possibility that buyers could form a coalition to conduct arbitrage. We study the optimal sale mechanism that takes into account both individual and coalition incentive compatibility. We show that the monopolist can achieve the same profit regardless of whether or not buyers can form a coalition. Although marginal rates of substitution are not equalized across buyers of different types in the optimal sale mechanism, they fail to realize the gains from arbitrage because of the transaction costs in coalition formation generated by asymmetric information.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (18)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Optimal Second-degree Price Discrimination and Arbitrage: On the Role of Asymmetric Information among Buyers (2015)
Working Paper: Optimal second-degree price discrimination and arbitrage: On the role of asymetric information among buyers (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:36:y:2005:2:p:337-360

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().