Template-Type: ReDIF-Paper 1.0
Title: Pigou Meets Wolinsky: Search, Price
Discrimination, and Consumer Sophistication
Author-Name: Carl-Christian Groh, 
Author-Email: cgroh@uni-bonn.de
Author-Name: Jonas von Wangenheim
Author-Email: jwangenheim@uni-bonn.de

Classification-JEL: D21, D43, D83, D90

Keywords: search, price discrimination, welfare, bounded rationality, anonymity


Abstract: We study the competitive effects of personalized pricing in horizontally differentiated
markets with search frictions. We integrate the possibility of first degree price discrimination
into the classic Wolinsky (1986) framework of consumer search. If all consumers
are rational, personalized pricing leads to higher consumer surplus if and only if there
are no search frictions. If all consumers are unaware that firms price discriminate, i.e.
are naive as in Eyster and Rabin (2005), this result is reversed: Personalized pricing
improves consumer surplus unless search costs are prohibitive.

Note: 
Length: 53
Creation-Date: 2024-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp527
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_527