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On the Alignment of Consumer Surplus and Total Surplus under Competitive Price Discrimination

Author

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  • Dirk Bergemann
  • Benjamin Brooks
  • Stephen Morris

Abstract

We study the role of information in Bertrand competition with differentiated goods and heterogeneous production costs. When producers know their costs and consumers know their values, consumer surplus and total surplus are aligned, in the sense that the information and equilibrium that maximize consumer surplus also maximize total surplus. Alignment may fail if consumers do not know their values: Partial information about values makes purchases less efficient but intensifies price competition. We illustrate this within a Hotelling duopoly framework.

Suggested Citation

  • Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2025. "On the Alignment of Consumer Surplus and Total Surplus under Competitive Price Discrimination," American Economic Journal: Microeconomics, American Economic Association, vol. 17(4), pages 234-259, November.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:4:p:234-59
    DOI: 10.1257/mic.20240197
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    Cited by:

    1. Christoph Carnehl & Anton Sobolev & Konrad Stahl & André Stenzel, 2025. "Designing Vertical Differentiation with Information," CRC TR 224 Discussion Paper Series crctr224_2025_700v2, University of Bonn and University of Mannheim, Germany, revised Feb 2026.
    2. Seungjin Han & Alex Sam & Youngki Shin, 2024. "Optimal Wage Band for Job Matching with Signaling," Papers 2406.01886, arXiv.org, revised Jul 2025.
    3. Bergemann, Dirk & Bonatti, Alessandro & Wu, Nicholas, 2025. "Bidding with budgets: Data-driven bid algorithms in digital advertising," International Journal of Industrial Organization, Elsevier, vol. 102(C).

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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