Document de travail

Oligopoly under incomplete information: On the welfare effects of price discrimination

Daniel F. Garrett, Renato Gomes et Lucas Maestri

Résumé

We study competition by firms that simultaneously post (potentially nonlinear) tariffs to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms’ offers. In the absence of regulation, all firms offer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms’ profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective.

Mots-clés

oligopoly,; nonlinear pricing,; linear pricing; informational frictions; asymmetric information;

Codes JEL

  • D82: Asymmetric and Private Information • Mechanism Design

Référence

Daniel F. Garrett, Renato Gomes et Lucas Maestri, « Oligopoly under incomplete information: On the welfare effects of price discrimination », TSE Working Paper, n° 21-1282, décembre 2021.

Voir aussi

Publié dans

TSE Working Paper, n° 21-1282, décembre 2021