IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/2447.html
   My bibliography  Save this paper

Non-Discriminatory Personalized Pricing

Author

Listed:
  • Philipp Strack

    (Yale University)

  • Kai Hao Yang

    (Yale University)

Abstract

A monopolist offers personalized prices to consumers with unit demand, heterogeneous values, and idiosyncratic costs, who differ in a protected characteristic, such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different characteristics must face identical prices. Such constraints arise in regulated markets like credit or insurance. The setting reduces to an optimal transport, and we characterize the optimal pricing rule. Under this rule, consumers may retain surplus, and either group may benefit. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group.

Suggested Citation

  • Philipp Strack & Kai Hao Yang, 2025. "Non-Discriminatory Personalized Pricing," Cowles Foundation Discussion Papers 2447, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2447
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/2025-06/d2447.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Laura Doval & Alex Smolin, 2024. "Persuasion and Welfare," Journal of Political Economy, University of Chicago Press, vol. 132(7), pages 2451-2487.
    2. 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.
    3. Rodrigo Montes & Wilfried Sand-Zantman & Tommaso Valletti, 2019. "The Value of Personal Information in Online Markets with Endogenous Privacy," Management Science, INFORMS, vol. 65(3), pages 1342-1362, March.
    4. Greg Shaffer & Z. John Zhang, 2002. "Competitive One-to-One Promotions," Management Science, INFORMS, vol. 48(9), pages 1143-1160, September.
    5. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    6. 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.
    7. Simon Cowan, 2016. "Welfare-increasing third-degree price discrimination," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 326-340, May.
    8. Maryam Farboodi & Nima Haghpanah & Ali Shourideh, 2025. "Good Data and Bad Data: The Welfare Effects of Price Discrimination," Papers 2502.03641, arXiv.org.
    9. Annie Liang & Jay Lu & Xiaosheng Mu & Kyohei Okumura, 2021. "Algorithm Design: A Fairness-Accuracy Frontier," Papers 2112.09975, arXiv.org, revised May 2024.
    10. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alireza Fallah & Michael I. Jordan & Ali Makhdoumi & Azarakhsh Malekian, 2024. "The Limits of Price Discrimination Under Privacy Constraints," Papers 2402.08223, arXiv.org, revised Jun 2024.
    2. 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.
    3. Andrew Rhodes & Jidong Zhou, 2024. "Personalized Pricing and Competition," American Economic Review, American Economic Association, vol. 114(7), pages 2141-2170, July.
    4. Shota Ichihashi, 2020. "Online Privacy and Information Disclosure by Consumers," American Economic Review, American Economic Association, vol. 110(2), pages 569-595, February.
    5. Kai Hao Yang & Philipp Strack, 2023. "Privacy Preserving Signals," Cowles Foundation Discussion Papers 2379, Cowles Foundation for Research in Economics, Yale University.
    6. Ki-Eun Rhee, 2025. "Competitive Price Discrimination in Asymmetric Oligopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 67(1), pages 83-110, June.
    7. Aguirre, Iñaki, 2019. "Oligopoly price discrimination, competitive pressure and total output," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-16.
    8. Markus Dertwinkel‐Kalt & Christian Wey, 2023. "Third‐Degree Price Discrimination in Oligopoly when Markets are Covered," Journal of Industrial Economics, Wiley Blackwell, vol. 71(2), pages 464-490, June.
    9. Amedeo Piolatto, 2015. "Online booking and information: competition and welfare consequences of review aggregators," Working Papers 2015/11, Institut d'Economia de Barcelona (IEB).
    10. Tremblay, Mark J., 2019. "Pareto price discrimination," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    11. Esteves, Rosa-Branca & Carballo-Cruz, Francisco, 2023. "Can data openness unlock competition when an incumbent has exclusive data access for personalized pricing?," Information Economics and Policy, Elsevier, vol. 64(C).
    12. Oksana Loginova & Andrea Mantovani, 2019. "Price competition in the presence of a web aggregator," Journal of Economics, Springer, vol. 126(1), pages 43-73, January.
    13. Felipe Avilés-Lucero & Andre Boik, 2018. "Wholesale most-favored-nation clauses and price discrimination with negative consumption externalities: equivalence results," Journal of Regulatory Economics, Springer, vol. 54(3), pages 266-291, December.
    14. Elias Deutscher, 2022. "Brand bidding restraints revisited – What is the appropriate economic and legal framework for the antitrust analysis of vertical online search advertising restraints?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2021-09, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    15. O. Loginova & A. Mantovani, 2015. "Information and Online Reviews," Working Papers wp996, Dipartimento Scienze Economiche, Universita' di Bologna.
    16. John Vickers, 2020. "Direct Welfare Analysis of Relative Price Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 68(1), pages 40-51, March.
    17. Li, Youping & Zhang, Jianhu, 2024. "The welfare effects of input price discrimination revisited," International Journal of Industrial Organization, Elsevier, vol. 95(C).
    18. Sun, Xiang & Xu, Jin & Zhou, Junjie, 2023. "Effort discrimination and curvature of contest technology in conflict networks," Games and Economic Behavior, Elsevier, vol. 142(C), pages 978-991.
    19. Jong-Hee Hahn & Chan KIm, 2018. "Input price discrimination with differentiated final products," Working papers 2018rwp-118, Yonsei University, Yonsei Economics Research Institute.
    20. Zibin Xu & Anthony Dukes, 2022. "Personalization from Customer Data Aggregation Using List Price," Management Science, INFORMS, vol. 68(2), pages 960-980, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:2447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.