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Elliott, M., Galeotti., A., Koh., A, and Li, W.

Market Segmentation Through Information

WP Number: 2114

Abstract: We explore the power that precise information about consumers’ preferences grants an intermediary in shaping competition. We think of an intermediary as an information designer who chooses what information to reveal to firms, which then compete `a la Bertrand in a differentiated product market. We characterize the information designs that maximize consumer and producer surplus, showing how information can be used to segment markets to intensify or soften competition. We also show how the power of the intermediary is further enhanced when it has some control over which products consumers are aware of.

Keywords: Information design, market segmentation, price discrimination

JEL Codes: D43 D83 L13

Author links: Matthew Elliott  

PDF: wp2114.pdf

Open Access Link: 10.17863/CAM.99007.2

Theme: networks