American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Limits of Price Discrimination
American Economic Review
vol. 105,
no. 3, March 2015
(pp. 921–57)
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 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. (JEL D42, D83, L12)Citation
Bergemann, Dirk, Benjamin Brooks, and Stephen Morris. 2015. "The Limits of Price Discrimination." American Economic Review, 105 (3): 921–57. DOI: 10.1257/aer.20130848Additional Materials
JEL Classification
- D42 Market Structure, Pricing, and Design: Monopoly
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L12 Monopoly; Monopolization Strategies