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Screening and Segmenting: A Consumer Surplus Perspective

Author

Listed:
  • Dirk Bergemann
  • Tibor Heumann
  • Michael C. Wang

Abstract

We analyze consumer surplus when a monopolist can adjust both prices and product qualities across segments, engaging in second- and third-degree price discrimination simultaneously. We characterize the consumer-optimal segmentation and show that it has a striking structure: consumers with the same value receive the same quality in every segment, though prices differ. Under mild conditions, any segmentation harms consumers if and only if demand is sufficiently more elastic than supply. Hence, potential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation.

Suggested Citation

  • Dirk Bergemann & Tibor Heumann & Michael C. Wang, 2024. "Screening and Segmenting: A Consumer Surplus Perspective," Papers 2401.12366, arXiv.org, revised Jun 2026.
    • Handle: RePEc:arx:papers:2401.12366
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    References listed on IDEAS

    as
    1. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    2. Joan Robinson, 1969. "The Economics of Imperfect Competition," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15320-6, September.
    3. Nima Haghpanah & Ron Siegel, 2022. "The Limits of Multiproduct Price Discrimination," American Economic Review: Insights, American Economic Association, vol. 4(4), pages 443-458, December.
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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