The Informational Benefit of Price Discrimination
We consider a monopoly supplying a homogeneous good to two separate markets with different demands. In one of the markets, some buyers do not know the quality of the good, but learn about it from observing prices. Under noisy demand, third-degree price discrimination is shown to alter the informational content of the price-signals received by the uninformed buyers. Specifically, discriminatory pricing have informational benefits over uniform pricing, i.e., the posterior beliefs of the uninformed buyers have a smaller bias and a lower variance.
|Date of creation:||Jul 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (514) 340-6463
Fax: (514) 340-6469
Web page: http://www.hec.ca/iea/
More information through EDIRC
|Order Information:|| Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wassim DAHER & Leonard J. MIRMAN & Marc Santugini, 2009.
"Information in Cournot: Signaling with Incomplete Control,"
Cahiers de recherche
09-09, HEC Montréal, Institut d'économie appliquée, revised Nov 2011.
- Daher, Wassim & Mirman, Leonard J. & Santugini, Marc, 2012. "Information in Cournot: Signaling with incomplete control," International Journal of Industrial Organization, Elsevier, vol. 30(4), pages 361-370.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Jeitschko, Thomas D. & Normann, Hans-Theo, 2011.
"Signaling in deterministic and stochastic settings,"
DICE Discussion Papers
35, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Jeitschko, Thomas D. & Normann, Hans-Theo, 2012. "Signaling in deterministic and stochastic settings," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 39-55.
- Thomas D. Jeitschko & Hans-Theo Normann, 2009. "Signaling in Deterministic and Stochastic Settings," Royal Holloway, University of London: Discussion Papers in Economics 09/12, Department of Economics, Royal Holloway University of London.
- Janssen, Maarten C.W. & Roy, Santanu, 2010.
"Signaling quality through prices in an oligopoly,"
Games and Economic Behavior,
Elsevier, vol. 68(1), pages 192-207, January.
- Mirman, Leonard J. & Salgueiro, Egas M. & Santugini, Marc, 2014.
"Noisy signaling in monopoly,"
International Review of Economics & Finance,
Elsevier, vol. 29(C), pages 504-511.
- Andrew F. Daughety & Jennifer F. Reinganum, 2005.
"Imperfect Competition and Quality Signaling,"
Vanderbilt University Department of Economics Working Papers
0520, Vanderbilt University Department of Economics.
- Wolinsky, Asher, 1983. "Prices as Signals of Product Quality," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 647-58, October.
- Kyle Bagwell & Michael Riordan, 1988.
"High and Declining Prices Signal Product Quality,"
808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Sanford Grossman, 1989. "The Informational Role of Prices," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572141, June.
- Andrew F. Daughety & Jennifer F. Reinganum, 1994.
"Product Safety: Liability, R&D and Signaling,"
Game Theory and Information
9403007, EconWPA, revised 30 Mar 1994.
When requesting a correction, please mention this item's handle: RePEc:iea:carech:1302. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Power)
If references are entirely missing, you can add them using this form.