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Using Information to Amplify Competition

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  • Wenhao Li

Abstract

I characterize the consumer-optimal market segmentation in competitive markets where multiple firms selling differentiated products to consumers with unit demand. This segmentation is public---in that each firm observes the same market segments---and takes a simple form: in each market segment, there is a dominant firm favored by all consumers in that segment. By segmenting the market, all but the dominant firm maximally compete to poach the consumer's business, setting price to equal marginal cost. Information, thus, is being used to amplify competition. This segmentation simultaneously generates an efficient allocation and delivers to each firm its minimax profit.

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  • Wenhao Li, 2020. "Using Information to Amplify Competition," Papers 2010.05342, arXiv.org, revised Nov 2020.
    • Handle: RePEc:arx:papers:2010.05342
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    References listed on IDEAS

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    1. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2015. "The Limits of Price Discrimination," American Economic Review, American Economic Association, vol. 105(3), pages 921-957, March.
    2. Mark Armstrong & Jidong Zhou, 2022. "Consumer Information and the Limits to Competition," American Economic Review, American Economic Association, vol. 112(2), pages 534-577, February.
    3. S. Nageeb Ali & Gregory Lewis & Shoshana Vasserman, 2019. "Voluntary Disclosure and Personalized Pricing," NBER Working Papers 26592, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Mark Armstrong & Jidong Zhou, 2022. "Consumer Information and the Limits to Competition," American Economic Review, American Economic Association, vol. 112(2), pages 534-577, February.
    2. Zhou, Jidong, 2021. "Mixed bundling in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 194(C).

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