Publication Date: May 2013
Revision Date: April 2014
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge diﬀerent prices to diﬀerent segments of the market, i.e., carry out “third degree price discrimination.”
We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as proﬁts under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by eﬀicient trade.
First degree price discrimination, Second degree price discrimination, Third degree price discrimination, Private information, Privacy, Bayes correlated equilibrium, Concaviﬁcation
JEL Classification Codes: C72, D82, D83