Price Discrimination with Private and Imperfect Information
AbstractThis paper investigates the competitive and welfare effects of information accuracy improvements in markets where firms can price discriminate after observing a private and noisy signal about a consumer’s brand preference. It shows that firms charge more to customers they believe have a brand preference for them, and that this price has an inverted-U shaped relationship with the signal’s accuracy. In contrast, the price charged after a disloyal signal has been observed falls as the signal’s accuracy rises. While industry profit and overall welfare fall monotonically as price discrimination is based on increasingly more accurate information, the reverse happens to consumer surplus.
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Bibliographic InfoPaper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 12/2012.
Date of creation: 2012
Date of revision:
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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
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Other versions of this item:
- Rosa Branca Esteves, 2010. "Price Discrimination with Private and Imperfect Information," NIPE Working Papers 3/2010, NIPE - Universidade do Minho.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-COM-2013-01-07 (Industrial Competition)
- NEP-CTA-2013-01-07 (Contract Theory & Applications)
- NEP-IND-2013-01-07 (Industrial Organization)
- NEP-MIC-2013-01-07 (Microeconomics)
- NEP-MKT-2013-01-07 (Marketing)
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- Rosa Branca Esteves, 2009. "A Survey on the Economics of Behaviour-Based Price Discrimination," NIPE Working Papers 5/2009, NIPE - Universidade do Minho.
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