Chapter 13- Price Discrimination and Menu Pricing Menu vs group pricing Group(and personalized) pricing Seller can infer consumers' willingness to pay from observable and verifiable characteristic (e.g., age) Menu pricing Willingness to pay private information e Seller must bring consumer to reveal this information How? Identify product dimension valued differently by consumers Design several versions of the product along that dimension Price versions to induce consumers' self-selection >Menu pricing(a.k.a. versioning, 2nd-degree price discrimination, nonlinear pricing) >Screening problem: uninformed party brings informed parties to reveal their private information e Wen Cao© Wen Cao 6 Menu vs. group pricing • Group (and personalized) pricing • Seller can infer consumers’ willingness to pay from observable and verifiable characteristic (e.g., age) • Menu pricing • Willingness to pay = private information • Seller must bring consumer to reveal this information. • How? • Identify product dimension valued differently by consumers • Design several versions of the product along that dimension • Price versions to induce consumers’ self-selection  Menu pricing (a.k.a. versioning, 2nd-degree price discrimination, nonlinear pricing)  Screening problem: uninformed party brings informed parties to reveal their private information Chapter 13 – Price Discrimination and Menu Pricing