American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
(Reverse) Price Discrimination with Information Design
American Economic Journal: Microeconomics
vol. 16,
no. 2, May 2024
(pp. 267–95)
Abstract
A seller markets a good to a customer whose willingness to pay depends on his private type and the good's quality. The seller designs a screening mechanism that specifies both transfers and information revealed about quality. We show that the optimal mechanism can be implemented by a menu of price-experiment pairs, featuring both price discrimination and information discrimination: buyers with higher private types face lower prices and receive less discerning positive signals. Moreover, we demonstrate the complementarity between these two forms of discrimination. Information design facilitates surplus creation on the extensive margin, but causes surplus destruction on the intensive margin.Citation
Wei, Dong, and Brett Green. 2024. "(Reverse) Price Discrimination with Information Design." American Economic Journal: Microeconomics 16 (2): 267–95. DOI: 10.1257/mic.20220242Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D42 Market Structure, Pricing, and Design: Monopoly
- D82 Asymmetric and Private Information; Mechanism Design
- L15 Information and Product Quality; Standardization and Compatibility
- M31 Marketing