Stable Market Segmentation Against Price Discrimination
53 Pages Posted: 22 Feb 2024
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Stable Market Segmentation against Price Discrimination
Abstract
According to current data regulations, consumers are mobile among different markets, which endogenizes market segmentation. Considering such strategic interactions, we say that a market segmentation is stable if no consumer has an incentive to deviate to another market. We show that in every stable market segmentation, the producer surplus remains at the uniform monopoly level, and the consumer surplus falls between the buyer-optimal level and the uniform monopoly level. Remarkably, no consumer is worse off than in the case of uniform monopoly. Therefore, our results justify the Pareto optimum of price discrimination and reveal the welfare implications of current regulations.
Keywords: Price discrimination, Market segmentation, Right to Be Forgotten, Strategic consumer, Welfare
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