Price Discrimination with Redistributive Concerns

Price Discrimination with Redistributive Concerns

By:

Daniel M A Barreto (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Alexis Ghersengorin (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Victor Augias (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract:

Consumer data can be used to sort consumers into different market segments, allowing a monopolist to charge different prices at each segment. We study consumer-optimal segmentations with redistributive concerns, i.e., that prioritize poorer consumers. Such segmentations are efficient but may grant additional profits to the monopolist, compared to consumer-optimal segmentations with no redistributive concerns. We characterize the markets for which this is the case and provide a procedure for constructing optimal segmentations given a strong redistributive motive. For the remaining markets, we show that the optimal segmentation is surprisingly simple: it generates one segment with a discount price and one segment with the same price that would be charged if there were no segmentation.