Informationally Robust Welfare Predictions Under Second-Degree Price Discrimination

45 Pages Posted: 5 Feb 2019 Last revised: 18 Nov 2019

See all articles by Kai Hao Yang

Kai Hao Yang

University of Chicago, Department of Economics

Date Written: November 14, 2019

Abstract

In an environment that features second-degree price discrimination, this paper fully characterizes the set of surplus divisions that can arise from all possible information consumers have about their valuation. By extending the techniques developed in a companion paper (Yang, 2019a), I show that the set of feasible surplus divisions can be characterized by a family of information structures that induce Pareto-distributed interim expected values. Unlike the linear model as in Roesler & Szentes (2017) where posted price is always optimal, the efficient frontier is generically not attainable under any information structures and there are environments in which a (nontrival) subset of the feasible surplus divisions collapses to a one-dimensional set. Nevertheless, the sets of feasible surplus divisions are stable around the linear environments.

Keywords: surplus division, information structure, mechanism design, price discrimination, nonlinear pricing, revenue maximization, virtual valuation

JEL Classification: D42, D61, D82, D83

Suggested Citation

Yang, Kai Hao, Informationally Robust Welfare Predictions Under Second-Degree Price Discrimination (November 14, 2019). Available at SSRN: https://ssrn.com/abstract=3320956 or http://dx.doi.org/10.2139/ssrn.3320956

Kai Hao Yang (Contact Author)

University of Chicago, Department of Economics ( email )

1126 East 59th Street
Chicago, IL
United States

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