Price Discrimination with Redistributive Concerns

Daniel M A Barreto (1) , Alexis Ghersengorin (1, 2) , Victor Augias (1)

1 ECON - Département d'économie (Sciences Po)
2 PSE - Paris School of Economics

Consumer data can be used to sort consumers into different market segments, allowing a monopolist to charge different prices at each segment. We study consumer-optimal segmentations with redistributive concerns, i.e., that prioritize poorer consumers. Such segmentations are efficient but may grant additional profits to the monopolist, compared to consumer-optimal segmentations with no redistributive concerns. We characterize the markets for which this is the case and provide a procedure for constructing optimal segmentations given a strong redistributive motive. For the remaining markets, we show that the optimal segmentation is surprisingly simple: it generates one segment with a discount price and one segment with the same price that would be charged if there were no segmentation.

Keywords: Third-degree price discrimination; Information design; Redistribution; Inequality; Welfare

Domains: Economics and Finance

Daniel M A Barreto, Alexis Ghersengorin, Victor Augias. Price Discrimination with Redistributive Concerns. 2022. ⟨hal-04067226⟩