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A Unified Approach to Second and Third Degree Price Discrimination

Author

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  • Bergemann, Dirk
  • Heumann, Tibor
  • Wang, Michael

Abstract

We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations.

Suggested Citation

  • Bergemann, Dirk & Heumann, Tibor & Wang, Michael, 2024. "A Unified Approach to Second and Third Degree Price Discrimination," CEPR Discussion Papers 18793, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18793
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    Cited by:

    1. is not listed on IDEAS
    2. Soheil Ghili & K. Sudhir & Nitish Jain & Ankur Garg, 2025. "Second-degree Price Discrimination: Theoretical Analysis, Experiment Design, and Empirical Estimation," Papers 2507.13426, arXiv.org, revised Oct 2025.

    More about this item

    JEL classification:

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