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The Limits of Price Discrimination

The American economic review, 2015-03, Vol.105 (3), p.921-957 [Peer Reviewed Journal]

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Title:
The Limits of Price Discrimination
Author: Bergemann, Dirk ; Brooks, Benjamin ; Morris, Stephen
Subjects: Allocative efficiency ; Consumer behaviour ; Consumer economics ; Consumer prices ; Consumer surplus ; Consumers ; Discrimination ; Economic analysis ; Information analysis ; Market prices ; Market segmentation ; Market segments ; Monopolies ; Monopoly ; Predatory pricing ; Price discrimination ; Price efficiency ; Price theory ; Producer surplus ; Production costs ; Studies ; Total surplus ; Valuation
Is Part Of: The American economic review, 2015-03, Vol.105 (3), p.921-957
Description: 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 nonnegative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0002-8282
EISSN: 1944-7981
DOI: 10.1257/aer.20130848
CODEN: AENRAA
Source: ProQuest Central

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