Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2024

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Countering Price Discrimination with Buyer Information

Philipp Strack, Kai Hao Yang*

Building: Rotman School of Management
Room: Room 1065
Last modified: 2024-05-02

Abstract


We consider the welfare implications of buyer's information in a monopoly pricing setting, where the seller privately observes a signal for the buyer's value. The seller can commit to any mechanism that depends on the realizations of the seller's signal and the buyer's reported message. The buyer privately observes a signal about their own value, and then makes a participation decision and reports a message in the mechanism if participating. We characterize the buyer signals that maximizes the buyer's surplus. This buyer optimal signal is (i) privacy-preserving. Namely, it is independent of the seller's signal, so that the buyer is immune to any form of price discrimination; and (ii) unit-elastic, so that any posted price mechanism with prices in the support of the distribution of the buyer's posterior expected value is optimal for the seller. We further use these signals to characterize the welfare outcomes that can be induced by some buyer signal, and show that the set of feasible welfare outcomes becomes smaller as the seller's signal becomes Blackwell more informative.

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