American Economic Review Vol. 116 No. 10 2026
Screening and Segmenting: A Consumer Surplus Perspective
Abstract
We analyze consumer surplus when a monopolist can adjust both prices and product qualities across segments, engaging in secondand third-degree price discrimination simultaneously. We characterize the consumer-optimal segmentation and show that it has a striking structure: Consumers with the same value receive the same quality in every segment, though prices differ. Under mild conditions, any segmentation harms consumers if and only if demand is sufficiently more elastic than supply. Hence, potential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation.
- DOI
- 10.1257/aer.20250206
- Volume
- 116
- Issue
- 10
- Pages
- 3768-3801
- Language
- en
- Sources
- crossref openalex