Irrelevance of personalized pricing under strategic market segmentation
Abstract
A multiproduct seller is more informed than consumers about the value of her products to consumers. The seller posts a price list and segments the market through cheap-talk communication. We find that when both seller's and consumers' incentive-compatibility constraints are satisfied, the seller cannot benefit from personalized pricing (i.e., third-degree price discrimination). Based on that observation, we provide a tractable characterization of seller's maximum equilibrium profits. We apply our analysis to a credence-good setup and discuss when the credence goods seller benefits from communication. The irrelevance result breaks down when we relax seller's incentive-compatibility constraints.
Keywords
Cite
@article{arxiv.2303.13295,
title = {Irrelevance of personalized pricing under strategic market segmentation},
author = {Xiaoxiao Hu and Haoran Lei},
journal= {arXiv preprint arXiv:2303.13295},
year = {2025}
}
Comments
This paper subsumes and generalizes part of the results of a previously circulated working paper under the title "Information transmission in monopolistic credence goods markets."