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Discussion Paper Details

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Title: A Model of Search with Price Discrimination

Author(s): Natalia Fabra and Mar Reguant

Publication Date: March 2018

Keyword(s): bid solicitation, Competition, search and third-degree price discrimination

Programme Area(s): Industrial Organization

Abstract: We introduce observable heterogeneity across buyers into a model of simultaneous search. Buyers' dierences are informative about their willingness to search, giving rise to price discrimination even if they all have the same willingness to pay. We analyze and compare equilibrium outcomes when price discrimination is allowed and when it is not. We nd that the price comparison across consumers as well as the eects of banning price price discrimination critically depend on the elasticity of the search cost distribution. Interestingly, for normally distributed search costs, there is an inverted U-shape relationship between prices and buyers' size. Similarly, a ban on price discrimination hurts small and large buyers, to the benet of the medium-size ones.

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Bibliographic Reference

Fabra, N and Reguant, M. 2018. 'A Model of Search with Price Discrimination'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12823