Using Information to Amplify Competition

Wenhao Li

Papers from arXiv.org

Abstract: I characterize the consumer-optimal market segmentation in competitive markets where multiple firms selling differentiated products to consumers with unit demand. This segmentation is public---in that each firm observes the same market segments---and takes a simple form: in each market segment, there is a dominant firm favored by all consumers in that segment. By segmenting the market, all but the dominant firm maximally compete to poach the consumer's business, setting price to equal marginal cost. Information, thus, is being used to amplify competition. This segmentation simultaneously generates an efficient allocation and delivers to each firm its minimax profit.

Date: 2020-10, Revised 2020-11
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
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Citations: View citations in EconPapers (3)

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