SMU SOE Seminar (July 27, 2023): Price Discrimination with Manipulable Observables

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ABSTRACT This paper studies price discrimination using observables that are manipulable by the buyers at a cost. Rather than deterring manipulation, the optimal price discrimination mechanism (OPDM) offers each observable a personalized price that induces the buyers to pretend to have a lower valuation. The OPDM always leads to a higher market coverage than uniform pricing; however, the implications on consumer and total welfare are ambiguous due to the manipulation costs incurred in equilibrium. Exclusion might still arise even if all the observables are served. When the manipulation cost is high, the buyer’s utility becomes nonmonotonic in his valuation, with the intermediate (rather than low) valuation buyers the first to have their surplus completely extracted. Price commitment is strictly valuable to the monopolist; without it, the equilibrium becomes partitional and personalized pricing becomes less granular. Keywords: Personalized pricing; Price discrimination; Manipulable observables JEL Codes: D42, D82, L12 Click here to view the CV.
		PRESENTER Teck Yong Tan University of Nebraska-Lincoln
		RESEARCH FIELDS Industrial Organization Information Economics Microeconomic Theory
		DATE: 27 July 2023 (Thursday)
		TIME: 2pm - 3.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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