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(Reverse) Price Discrimination with Information Design

Author

Listed:
  • Dong Wei
  • Brett Green

Abstract

A seller markets a good to a customer whose willingness to pay depends on his private type and the good's quality. The seller designs a screening mechanism that specifies both transfers and information revealed about quality. We show that the optimal mechanism can be implemented by a menu of price-experiment pairs, featuring both price discrimination and information discrimination: buyers with higher private types face lower prices and receive less discerning positive signals. Moreover, we demonstrate the complementarity between these two forms of discrimination. Information design facilitates surplus creation on the extensive margin, but causes surplus destruction on the intensive margin.

Suggested Citation

  • Dong Wei & Brett Green, 2024. "(Reverse) Price Discrimination with Information Design," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 267-295, May.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:2:p:267-95
    DOI: 10.1257/mic.20220242
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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