This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Journal: Microeconomics
  4. Forthcoming Articles
  5. On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination

  • Dirk Bergemann
  • Benjamin Brooks
  • Stephen Morris
American Economic Journal: Microeconomics (Forthcoming)

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. Less information for either producers or consumer may intensify competition in a way that benefits the consumer but results in inefficient production. We illustrate this within the Hotelling duopoly.

Downloads