On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination

Dirk Bergemann, Benjamin Brooks and Stephen Morris
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Benjamin Brooks: University of Chicago

No 2373R1, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Producers of heterogeneous goods with heterogeneous costs compete in prices. When producers know their own production costs and the consumer knows their values, consumer surplus and total surplus are aligned: the information structure and equilibrium that maximize consumer surplus also maximize total surplus. We report when alignment extends to the case where either the consumer is uncertain about their own values or producers are uncertain about their own costs, and we also give examples showing when it does not. Less information for either producers or consumer may intensify competition in a way that benefits the consumer but results in inefficient production. We also characterize the information for consumer and producers that maximizes consumer surplus in a Hotelling duopoly.

Pages: 59 pages
Date: 2024-05-29
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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Working Paper: On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination (2023)
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