Informationally Robust Welfare Predictions Under Second-Degree Price Discrimination
45 Pages Posted: 5 Feb 2019 Last revised: 18 Nov 2019
Date Written: November 14, 2019
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
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