Document Type
Discussion Paper
Publication Date
5-29-2024
CFDP Number
2373R1
CFDP Pages
59
Journal of Economic Literature (JEL) Code(s)
C72, D44, D82, D83
Abstract
Producers of heterogeneous goods with heterogeneous costs compete in prices. When producers know their own production costs and the consumer knows 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 the consumer is 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 consumer may intensify competition in a way that benefits the consumer but results in inefficient production. We also characterize the information for consumer and producers that maximizes consumer surplus in a Hotelling duopoly.
Recommended Citation
Bergemann, Dirk; Brooks, Benjamin; and Morris, Stephen, "On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination" (2024). Cowles Foundation Discussion Papers. 2797.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2797