The paper presented in this MaCCI/EPoS Virtual IO Seminar studies price discrimination in a model of sequential search based on Stahl (1989). Firms are probabilistically able to discriminate between consumers based on their search costs. The “common” prices that are offerd both to consumers with zero search cost (“shoppers”) and with a positive search cost (“nonshoppers”) serve the same dual purpose as in Stahl (1989): attracting the shoppers and extracting profits from the nonshoppers. The shoppers’ discriminatory price is randomly drawn, but always lower than any common price. The nonshoppers’ discriminatory price is, instead, equal to their cutoff price. When price discrimination is allowed, then an individual firm’s profits increase in the number of competitors for an open set of parameter values. A firm, thus, sometimes strictly prefers more competitors and can more than double its profits by splitting and selling as two entities. Such spurious competition erodes consumer welfare.
The seminars are held on ZOOM. Register with the external registration form to receive reminders, updates, and ZOOM Meeting ID information via e-mail. Seminar presentations are scheduled to last a total of 75 minutes (60 minutes presentations plus 15 minutes Q&A).