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Optimal mechanisms for selling market segmentation

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  • Terstiege, Stefan

Abstract

We study optimal mechanisms for a data broker selling market segmentation to a producer. The producer engages in discriminatory pricing and is privately informed about a payoff-relevant parameter. We first characterize a class of markets from which the segmentations in optimal mechanisms can be constructed. If the profit-maximizing prices of different producer types are ordered and only downward or only upward incentive constraints bind, this analysis shows that in any created market either all consumer types are served or just a single one. We then characterize optimal mechanisms for a valuation structure that captures differing product quality. In particular, the consumers are segmented into markets in which everyone is served. Lastly, we give a sufficient condition under which optimal mechanisms are efficient regardless of the binding constraints.

Suggested Citation

  • Terstiege, Stefan, 2026. "Optimal mechanisms for selling market segmentation," Games and Economic Behavior, Elsevier, vol. 159(C), pages 179-197.
    • Handle: RePEc:eee:gamebe:v:159:y:2026:i:c:p:179-197
    DOI: 10.1016/j.geb.2026.06.007
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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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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