The Limits of Price Discrimination

Dirk Bergemann, Benjamin Brooks and Stephen Morris

No 1464, Working Papers from Princeton University, Department of Economics, Econometric Research Program.

Abstract: We analyze the welfare consequences of a monopolist having additional information about consumers' tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out "third degree price discrimination". We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the efficient gains from trade. As well as characterizing the welfare impact of price discrimination, we examine the limits of how prices and quantities can change under price discrimination. We also examine the limits of price discrimination in richer environments with quantity discrimination and limited ability to segment the market.

Keywords: First Degree Price Discrimination; Second Degree Price Discrimination; Third Degree Price Dis- crimination; Private Information; Privacy; Bayes Correlated Equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Date: 2013-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://detc.princeton.edu/wp-content/uploads/2016/ ... e-Discrimination.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://detc.princeton.edu/wp-content/uploads/2016/11/wp052_2013-revised-24Sep14_Bergemann_Brooks_Morris_The-Limits-of-Price-Discrimination.pdf [302 Found]--> https://detc.princeton.edu/wp-content/uploads/2016/11/wp052_2013-revised-24Sep14_Bergemann_Brooks_Morris_The-Limits-of-Price-Discrimination.pdf [301 Moved Permanently]--> https://economics.princeton.edu/the-william-s-dietrich-ii-economic-theory-center/wp-content/uploads/2016/11/wp052_2013-revised-24Sep14_Bergemann_Brooks_Morris_The-Limits-of-Price-Discrimination.pdf)

Related works:
Journal Article: The Limits of Price Discrimination (2015)
Working Paper: The Limits of Price Discrimination (2014)
Working Paper: The Limits of Price Discrimination (2014)
Working Paper: The Limits of Price Discrimination (2013)
Working Paper: The Limits of Price Discrimination (2013)
Working Paper: The Limits of Price Discrimination (2013)
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:pri:metric:wp052_2013_bergemann_brooks_morris_the-limits-of-price-discrimination.pdf

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Econometric Research Program. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().