Problem
Research questions and friction points this paper is trying to address.
Price Discrimination
Consumer Welfare
Revealed Preference
Market Segmentation
Consumer Surplus
Price Discrimination and Revealed Consumer Welfare
🤖 AI Summary
This study addresses how to quantify the impact of price discrimination on consumer welfare in the absence of information regarding demand curves and monopolist characteristics. Grounded in revealed preference theory, this work utilizes only pre- and post-market-segmentation price-quantity observations without imposing specific functional forms. By characterizing the set of rationalizable observations and integrating linear programming with geometric analysis, it derives rigorous upper and lower bounds on changes in consumer surplus. Furthermore, the research establishes necessary and sufficient conditions under which the sign of welfare variation is unambiguously determined, achieving exact identification without model assumptions. These findings provide robust and operationally feasible empirical criteria for evaluating the welfare effects of price discrimination.
📝 Abstract
We take a revealed-preference approach to study the welfare effects of price discrimination. An analyst observes price and quantity data before and after a monopolist segments the market. The analyst knows neither the aggregate demand curve nor the information available to the monopolist. We characterize the set of observable price-quantity pairs that are rationalizable by some market segmentation. We then obtain sharp bounds on the change in consumer surplus arising from some segmentation. Finally, we provide conditions under which the data identifies an unambiguous increase (decrease) in consumer surplus.
Innovation
Methods, ideas, or system contributions that make the work stand out.
Price Discrimination
Revealed Preference
Consumer Welfare
Market Segmentation
Sharp Bounds
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