(Reverse) Price Discrimination with Information Design

57 Pages Posted: 16 Oct 2018 Last revised: 2 May 2019

See all articles by Dong Wei

Dong Wei

University of California, Berkeley - Department of Economics

Brett S. Green

University of California, Berkeley - Haas School of Business; Washington University in St. Louis - John M. Olin Business School

Date Written: April 30, 2019

Abstract

A monopolistic seller is marketing a good to a customer whose willingness to pay is determined by both his private type and the quality of the good. The seller can design a menu of both prices and experiments --- that reveal information about quality. We show that the optimal mechanism features both price discrimination and information discrimination: buyers with higher private types face lower prices and receive less precise positive signals. Our mechanism remains optimal within a general class of mechanisms satisfying ex post individually rationality. Overall, information design facilitates surplus creation (destruction) on the extensive (intensive) margin.

Keywords: price discrimination, mechanism design, information design

JEL Classification: D82, D86, L15

Suggested Citation

Wei, Dong and Green, Brett S., (Reverse) Price Discrimination with Information Design (April 30, 2019). Available at SSRN: https://ssrn.com/abstract=3263898 or http://dx.doi.org/10.2139/ssrn.3263898

Dong Wei (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

Brett S. Green

University of California, Berkeley - Haas School of Business ( email )

2220 Piedmont Avenue
Berkeley, CA ca 94720
United States
5105759980 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu/bgreen/

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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