Quality of Information and Oligopolistic Price Discrimination

Qihong Liu () and Konstantinos Serfes ()

Journal of Economics & Management Strategy, 2004, vol. 13, issue 4, 671-702

Abstract: Recent developments in information technology (IT) have resulted in the collection of a vast amount of customer‐specific data. As IT advances, the quality of such information improves. We analyze a unifying spatial price discrimination model that encompasses the two most studied paradigms of two‐group and perfect discrimination as special cases. Firms use the available information to classify the consumers into different groups. The number of identifiable consumer segments increases with the information quality. Among our findings (1) when the information quality is low, unilateral commitments not to price discriminate arise in equilibrium; (2) after a unique threshold of information precision such a commitment is a dominated strategy, and the game becomes a prisoners' dilemma; and (3) equilibrium profits exhibit a U‐shaped relationship with the information quality.

Date: 2004
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Citations: View citations in EconPapers (98)

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https://doi.org/10.1111/j.1430-9134.2004.00028.x

Related works:
Working Paper: Quality of Information and Oligopolistic Price Discrimination (2002)
Working Paper: Quality of Information and Oligopolistic Price Discrimination (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:13:y:2004:i:4:p:671-702

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