Theme：Stable Market Segmentation Against Price Discrimination

Lecturer：Zhonghong Kuang, School of Economics, Renmin University of China, School of Economics, Shanghai University of Finance and Economics

Time：2022.04.28 14:00

Site：Tecent meeting 345-339-175

  Abstract：

  In this paper, we consider a novel market segmentation problem capturing the impact of the tag-related regulation on tag-based price discrimination in e-commerce. In contrast to the literature, tag-editable market segmentation (TEMS) is driven by consumer incentives. We apply the collective-decision perspective on the TEMS problem and raise a new concept of stable market segmentation, which captures how the strategic consumers form a market segmentation. We also propose the concept of group stable market segmentation for the scenarios where consumers can collude or interact with each other. We pin down all possible welfare consequences and find that TEMS can have (group) stable market segmentations maximizing the social welfare and consumer surplus. Specifically, the producer surplus remains at the uniform monopoly level in all (group) stable segmentations. Meanwhile, the consumer surplus can reach any value between the maximum consumer surplus and the consumer surplus under the uniform monopoly price. Our result immediately reveals that some (not all) buyer-optimal outcomes can survive under strategic consumers. Moreover, when surplus pairs are located at the efficient frontier, stable and group stable are equivalent definitions. All social-optimal stable segmentations share the same price profile over sub-markets. The price profile can be solved by a polynomial algorithm and used to find all social-optimal stable segmentations. We also incorporate tag-selection cost and the possibility where willingness-to-pay is continuously distributed. Our analysis provides a novel perspective on market-power and privacy regulations in e-commerce: Democratize the market-power regulation by crowdsourcing strategic choices of consumers. Rather than forbidding tag-based price discrimination, the policymaker shall allow and enforce the tag-editable policy.

  Introduction to the lecturer：