Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2019

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Consumer-Optimal Market Segmentation

Nima Haghpanah*, Ron Siegel

Date: 2019-05-04 2:30 pm – 3:00 pm
Last modified: 2019-04-14

Abstract


Consumer surplus in a market is affected by how the market is segmented. We study the maximum consumer surplus across all possible segmentations of a given market served by a multi product monopolist.   We characterize markets for which the maximum consumer surplus equals a first best benchmark (i.e., maximum total surplus minus minimum profit).  The first best benchmark is achievable whenever the seller does not find it profitable to screen types by offering multiple bundles, highlighting a novel impact of screening. We also characterize markets for which consumer surplus can be increased compared to the unsegmented market, and show that these markets are generic. We construct a simple segmentation that improves consumer surplus in these markets.


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