Non-Discriminatory Personalized Pricing

Philipp Strack () and Kai Hao Yang ()
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Philipp Strack: Department of Economics, Yale University
Kai Hao Yang: School of Management, Yale University

No 2447R1, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: A monopolist offers personalized prices to consumers with unit demand. Consumers differ in their values, costs, and protected characteristics such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different protected characteristics must face identical price distributions. Such regulations are present in markets like credit or insurance. We characterize the optimal pricing rule. Under this rule, surplus accrues to both protected groups, but only to those with intermediate values. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group. Meanwhile, prohibiting the use of protected characteristics as pricing inputs instead of regulating outputs harms the low-value group.

Keywords: Price discrimination; personalized pricing; discrimination; market segmentation; protected characteristics; optimal transport (search for similar items in EconPapers)
Date: 2026-05-28
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