Information acquisition and price discrimination in dynamic, decentralized markets

Michael Choi and Guillaume Rocheteau

Review of Economic Dynamics, 2024, vol. 53, 1-46

Abstract: We formalize a decentralized market where consumers with privately-known preferences meet bilaterally with firms. The latter acquire information to raise their degree of price discrimination from second to first. In a dynamic setting where outside options are endogenous, information choices are strategic complements, possibly generating multiple equilibria across which consumers' surpluses and firms' investment in information are negatively correlated. While there exists a sequence of equilibria converging to perfect competition when trading frictions vanish, there exist other equilibria that fail to approach perfect competition. Our findings are robust to firm heterogeneity, entry, noisy signals, and consumers' price-setting power. (Copyright: Elsevier)

Keywords: Search; Information; Rent seeking (search for similar items in EconPapers)
JEL-codes: D82 D83 E40 E50 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1016/j.red.2024.01.001

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