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A Unified Approach to Second and Third Degree Price Discrimination

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Listed:
  • Dirk Bergemann

    (Yale University)

  • Tibor Heumann

    (Pontificia Universidad Catolica de Chile)

  • Michael C. Wang

    (Yale University)

Abstract

We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations.

Suggested Citation

  • Dirk Bergemann & Tibor Heumann & Michael C. Wang, 2024. "A Unified Approach to Second and Third Degree Price Discrimination," Cowles Foundation Discussion Papers 2376, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2376
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    References listed on IDEAS

    as
    1. Justin P. Johnson & David P. Myatt, 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," American Economic Review, American Economic Association, vol. 93(3), pages 748-774, June.
    2. Joan Robinson, 1969. "The Economics of Imperfect Competition," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15320-6.
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