Document Type
Discussion Paper
Publication Date
3-2026
CFDP Number
2498
CFDP Update Date
06/24/2026
CFDP Pages
56
Journal of Economic Literature (JEL) Code(s)
D42, D83, L12
Abstract
We analyze consumer surplus when a monopolist can adjust both prices and prod-uct qualities across segments, engaging in second- and third-degree price discrimination simultaneously. We characterize the consumer-optimal segmentation and show that it has a striking structure: consumers with the same value receive the same quality in every segment, though prices differ. Under mild conditions, any segmentation harms consumers if and only if demand is sufficiently more elastic than supply. Hence, po-tential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation.
Recommended Citation
Bergemann, Dirk; Heumann, Tibor; and Wang, Michael C., "Screening and Segmenting: A Consumer Surplus Perspective" (2026). Cowles Foundation Discussion Papers. 2926.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2926