American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
On the Alignment of Consumer Surplus and Total Surplus under Competitive Price Discrimination
American Economic Journal: Microeconomics
(pp. 234–59)
Abstract
We study the role of information in Bertrand competition with differentiated goods and heterogeneous production costs. When producers know their costs and consumers know their values, consumer surplus and total surplus are aligned, in the sense that the information and equilibrium that maximize consumer surplus also maximize total surplus. Alignment may fail if consumers do not know their values: Partial information about values makes purchases less efficient but intensifies price competition. We illustrate this within a Hotelling duopoly framework.Citation
Bergemann, Dirk, Benjamin Brooks, and Stephen Morris. 2025. "On the Alignment of Consumer Surplus and Total Surplus under Competitive Price Discrimination." American Economic Journal: Microeconomics 17 (4): 234–59. DOI: 10.1257/mic.20240197Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness