Price Discrimination with Private and Imperfect Information

Rosa Esteves ()

Scandinavian Journal of Economics, 2014, vol. 116, issue 3, 766-796

Abstract: type="main">

In this paper, I investigate the competitive and welfare effects of the improvements in information accuracy in markets where firms can price discriminate after observing a private and noisy signal about a consumer's brand preference. I show that when firms believe that consumers have a brand preference for them, then they charge more to these consumers, and this price has an inverse U-shaped relationship with the signal's accuracy. In contrast, the price charged after a disloyal signal has been observed falls as the signal's accuracy rises. While industry profit and overall welfare fall monotonically when price discrimination is based on increasingly more accurate information, the reverse happens to consumer surplus.

Date: 2014
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Related works:
Working Paper: Price Discrimination with Private and Imperfect Information (2012)
Working Paper: Price Discrimination with Private and Imperfect Information (2010)
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