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Price Discrimination and Salient Thinking

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  • Nana Adrian

Abstract

This paper generalizes the price discrimination framework of Mussa and Rosen (1978) by considering salience-driven consumer preferences in the sense of Bordalo et al. (2013b). Consumers with salience-driven preferences give a higher weight to attributes that vary more. This reduces the monopolist's propensity to treat different types of consumers differently. The paper's main result characterizes the conditions under which the monopolist induces consumers to focus on price rather than on quality.

Suggested Citation

  • Nana Adrian, 2019. "Price Discrimination and Salient Thinking," Diskussionsschriften dp1906, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1906
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    More about this item

    Keywords

    Salience; price discrimination; monopolist;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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