Fatemi, Farshad (2010): Information Acquisition and Price Discrimination.
Download (319kB) | Preview
We consider a Hotelling model of price competition where firms may acquire costly information regarding the preferences (i.e. “location”) of customers. By purchasing additional information, a firm has a finer partition regarding customer preferences, and its pricing decisions must be measurable with respect to this partition. If information acquisition decisions are common knowledge at the point where firms compete via prices, we show that a pure strategy subgame perfect equilibrium exists, and that there is “excess information acquisition” from the point of view of the firms. If information acquisition decisions are private information, a pure strategy equilibrium fails to exist. We compute a mixed strategy equilibrium for a range of parameter values.
|Item Type:||MPRA Paper|
|Original Title:||Information Acquisition and Price Discrimination|
|Keywords:||Information Acquisition; Price Discrimination|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||Farshad Fatemi|
|Date Deposited:||04 Feb 2010 08:30|
|Last Modified:||28 Sep 2016 08:19|
Armstrong, M. “Recent Developments in the Economics of Price Discrimination.” In R. Blundell, W. K. Newey, and T. Persson, eds. Advances in Economics and Econometrics: Theory and Applications; Ninth World Congress of the Econometric Society Vol. II, Cambridge: Cambridge University Press, 2006.
Armstrong, M., and J. Vickers “Competitive Price Discrimination.” RAND Journal of Economics, Vol. 32 (2001), pp. 579-605.
Bhaskar, V. and T. To “Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry.” RAND Journal of Economics, Vol. 35 (2004), pp. 762-776.
Borenstein, S. “Price Discrimination in Free-Entry Markets.” RAND Journal of Economics, Vol. 16, (1985), pp. 380-397.
Bulow, J. I., J. D. Geanakoplos, and P. Klemperer “Multimarket Oligopoly: Strategic Substitutes and Complements.” Journal of Political Economy, Vol. 93 (1985), pp. 488-511.
Corts, K. S. “Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment.” RAND Journal of Economic Studies, Vol. 29 (1998), pp. 306-323.
d'Aspremont, C., J. J. Gabszewicz, and J. F. Thisse “On Hotelling's "Stability in Competition".” Econometrica, Vol. 47 (1979), pp. 1145-1150.
Fudenberg, D. and J. Tirole “The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look.” The American Economic Review, Vol. 74 (1984), pp. 361-366.
Hamilton, J. and S. Slutsky “Nonlinear Price Discrimination with a Finite Number of Consumers and Constrained Recontracting.” International Journal of Industrial Organization, Vol. 22 (2004), pp. 737-757.
Liu, Q. and K. Serfes “Imperfect Price Discrimination, Market Structure and Efficiency.” Canadian Journal of Economics, Vol. 38 (2005), pp. 1191-1203.
Liu, Q. and K. Serfes “Quality of Information and Oligopolistic Price Discrimination”, Journal of Economics & Management Strategy, Vol. 13 (2004), pp. 671-702.
Pigou, A. C. The Economics of Welfare. London: MacMillan, 1920.
Robinson, J. The Economics of Imperfect Competition. London: MacMillan, 1933.
Schmalensee, R. “Output and Welfare Effects of Monopolistic Third-Degree Price Discrimination.” American Economic Review, Vol. 71 (1981), pp. 242-247.
Shaffer, G., and Z. J. Zhang “Competitive One-to-One Promotion.” Management Sciences, Vol. 48 (2002), pp. 1143-1160.
Varian, H. R. “Price Discrimination and Social Welfare.” American Economic Review, Vol. 75 (1985), pp. 870-875.
Varian, H. R. “Price Discrimination.” In R. Schmalensee, and R. D. Willing, eds. The Handbook of Industrial Organization Vol. 1, New York: Elsevier Science Publisher, 1989.