Discriminatory Pricing in Sequential Search Markets

Eeva Mauring and Cole Williams

No 17907, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Consumer-tracking technology offers new tools for price discrimination in digital markets. We examine the impact of sellers using this technology to adjust prices according to a buyer’s prior search length in a competitive search market where buyers differ in patience. We find discriminatory equilibria wherein sellers reduce prices for buyers with longer search lengths which in turn requires them to reduce prices for buyers with shorter search lengths. In commonly studied environments, discriminatory equilibria not only yield higher welfare for every buyer than all uniform-pricing equilibria, but are the only equilibria when some mass of buyers are arbitrarily patient.

Keywords: Digital markets; Price discrimination; Sequential search (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 (search for similar items in EconPapers)
Date: 2023-02
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