Abstract
Price discrimination comprises a wide variety of practices aimed at extracting rents from a base of heterogeneous consumers. When consumer types are private information and only their distribution is known to the monopolist, finding the optimal nonlinear tariff involves solving a constrained variational problem that characterizes the optimal markup for each purchase level so that consumers of different types have no incentive to imitate the behaviour of others. Fully separating equilibrium is ensured when the distribution of types fulfills the increasing hazard rate property and individual demands can be unambiguously ranked. Outside this framework, optimal tariffs are difficult to characterize.
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Miravete, E.J. (2018). Price Discrimination (Theory). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2630
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2630
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