American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Screening and Segmenting: A Consumer Surplus Perspective
American Economic Review
(pp. 3768–3801)
Abstract
We analyze consumer surplus when a monopolist can adjust both prices and product 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, potential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation.Citation
Bergemann, Dirk, Tibor Heumann, and Michael C. Wang. 2026. "Screening and Segmenting: A Consumer Surplus Perspective." American Economic Review 116 (10): 3768–3801. DOI: 10.1257/aer.20250206Additional Materials
JEL Classification
- D42 Market Structure, Pricing, and Design: Monopoly
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- K21 Antitrust Law
- L12 Monopoly; Monopolization Strategies
- L15 Information and Product Quality; Standardization and Compatibility