Harmonic price targeting

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Abstract

This paper studies third-degree price discrimination in a classical model of price competition with differentiated products. Firms charge different prices to different consumers, based on their estimate of their price sensitivity. If the market is fully covered and information is symmetric, more accurate information has a pure redistributive effect, leading to higher profits but lower consumer welfare. If the market is not covered, information always benefit firms but the welfare effects are ambiguous. If information is asymmetric, firms benefit from more information, but less so than in the symmetric case, and total welfare depends on the extent of this asymmetry. I conclude that firms have strong incentives to share information about consumer tastes.

Original languageEnglish
Article number100984
Number of pages6
JournalInformation Economics and Policy
Volume60
DOIs
Publication statusPublished - Sep 2022

Austrian Fields of Science 2012

  • 502013 Industrial economics

Keywords

  • HBE

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