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arXiv · 2303.13295

Irrelevance of personalized pricing under strategic market segmentation

Xiaoxiao Hu·Haoran Lei
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Abstract

A multiproduct seller is more informed than consumers about the value of her products to consumers. The seller posts a price list and segments the market through cheap-talk communication. We find that when both seller's and consumers' incentive-compatibility constraints are satisfied, the seller cannot benefit from personalized pricing (i.e., third-degree price discrimination). Based on that observation, we provide a tractable characterization of seller's maximum equilibrium profits. We apply our analysis to a credence-good setup and discuss when the credence goods seller benefits from communication. The irrelevance result breaks down when we relax seller's incentive-compatibility constraints.

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Xiaoxiao Hu, Haoran Lei. 2023-03-23. Irrelevance of personalized pricing under strategic market segmentation. https://arxiv.org/abs/2303.13295

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