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Price discrimination via information provision

Listed author(s):
  • Bang, Se Hoon
  • Kim, Jaesoo

We study price discrimination where different prices are offered as a bundle with different levels of information about a product. The seller’s price discrimination induces high valuation buyers to purchase a good without information and low valuation buyers to purchase with information. Our analysis highlights several interesting results about price discrimination: (i) the seller’s choice of information provision is the combination of full information and no information, (ii) products can be cheaper without information provision than with information provision, (iii) as a result of price discrimination, prices can be more dispersed as buyers’ valuations become largely similar, and (iv) the high valuation buyers purchase a damaged good and may earn negative surplus. Furthermore, we investigate under which circumstances price discrimination is more profitable than uniform pricing. We show that a decline in transportation costs which facilitate price discrimination can be welfare reducing.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167624513000218
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Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 25 (2013)
Issue (Month): 4 ()
Pages: 215-224

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Handle: RePEc:eee:iepoli:v:25:y:2013:i:4:p:215-224
DOI: 10.1016/j.infoecopol.2013.06.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505549

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