Oligopoly under incomplete information: on the welfare effects of price discrimination

Daniel F. Garrett, Renato Gomes () and Lucas Maestri ()
Additional contact information
Daniel F. Garrett: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Renato Gomes: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Lucas Maestri: FGV-EPGE - Universidad de Brazil

Post-Print from HAL

Abstract: We study competition by firms that simultaneously post (potentially nonlinear) taris to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms' oers. In the absence of regulation, all firms oer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms' profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective.

Keywords: Nonlinear pricing; Oligopoly; Asymmetric information; Linear pricing; Informational frictions (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cwa, nep-gth, nep-ind, nep-mic, nep-reg and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-03515749v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in International Journal of Industrial Organization, 2021, 79, ⟨10.1016/j.ijindorg.2021.102735⟩

Downloads: (external link)
https://hal.science/hal-03515749v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03515749

DOI: 10.1016/j.ijindorg.2021.102735

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().