Year: 2026
Type: article
Abstract: We analyze consumer surplus when a monopolist can adjust both prices and product qualities across segments, engaging in secondand 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. (JEL D42, D83, K21, L12, L15)
Source: American Economic Review
DOI: 10.1257/aer.20250206
Authors: Dirk Bergemann, Tibor Heumann, Michael C. Wang
Institutions: Yale University, Pontificia Universidad Católica de Chile
Language: English
Subfield: Marketing
Domain: Social Sciences
Open Access status: green
Funder: National Science Foundation
OpenAlex ID: W4391211972