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On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination

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Listed:
  • Dirk Bergemann

    (Yale University)

  • Benjamin Brooks

    (University of Chicago)

  • Stephen Morris

    (Massachusetts Institute of Technology)

Abstract

A number of producers of heterogeneous goods with heterogeneous costs compete in prices. When producers know their own production costs and consumers know their values, consumer surplus and total surplus are aligned: the information structure and equilibrium that maximize consumer surplus also maximize total surplus. We report when alignment extends to the case where either consumers are uncertain about their own values or producers are uncertain about their own costs, and we also give examples showing when it does not. Less information for either producers or consumers may intensify competition in a way that benefits consumers but results in inefficient production.

Suggested Citation

  • Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2023. "On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination," Cowles Foundation Discussion Papers 2373, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2373
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    File URL: https://cowles.yale.edu/sites/default/files/2023-11/d2373.pdf
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    References listed on IDEAS

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    1. Navin Kartik & Weijie Zhong, 2023. "Lemonade from Lemons: Information Design and Adverse Selection," Papers 2305.02994, arXiv.org.
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