Third Degree Price Discrimination Under Costly Information Acquisition

Irfan Tekdir

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arXiv · 2406.06026

Third Degree Price Discrimination Under Costly Information Acquisition

Irfan Tekdir

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Abstract

This paper investigates third-degree price discrimination under endogenous market segmentation. Segmenting a market requires access to information about consumers, and this information comes with a cost. I explore the trade-offs between the benefits of segmentation and the costs of information acquisition, revealing a non-monotonic relationship between consumer surplus and the cost of information acquisition for monopolist. I show that in some markets, allowing the monopolist easier access to customer data can also benefit customers. I also analyzed how social welfare reacts to changes in the cost level of information acquisition and showed that the non-monotonicity result is also valid in social welfare analysis.

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Irfan Tekdir. 2024-06-10. Third Degree Price Discrimination Under Costly Information Acquisition. https://arxiv.org/abs/2406.06026

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