Welfare of Competitive Price Discrimination with Captive Consumers

Yanlin Chen, Xianwen Shi and Jun Zhang

Working Papers from University of Toronto, Department of Economics

Abstract: We study the welfare effects of price discrimination in a duopoly market with both captive and contested consumers. Using a unified information design approach, we characterize the best and worst market segmentations for producer surplus, consumer surplus, and social surplus. The firm-optimal segmentation, which divides the market into two nested segments, consistently harms consumers compared to uniform pricing. The consumer-optimal segmentation, which divides the market into a symmetric segment and a nested segment, sometimes leads to a Pareto improvement. Social surplus, if monotone in firm profit, is often maximized either by the firm-optimal or consumer-optimal segmentation.

Keywords: Information Design; Market Segmentation; Firm-optimal Segmentation; Consumer-optimal Segmentation (search for similar items in EconPapers)
JEL-codes: D43 D82 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2025-01-16
New Economics Papers: this item is included in nep-com, nep-des, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-790

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