Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320287 
Year of Publication: 
2025
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 20 [Issue:] 1 [Year:] 2025 [Pages:] 303-351
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
The classic third degree price discrimination (3PD) model requires the knowledge of the distribution of buyer valuations and the covariate to set the price conditioned on the covariate. In terms of generating revenue, the classic result shows that 3PD is at least as good as uniform pricing. What if the seller has to set a price based only on a sample of observations from the underlying distribution? Is it still obvious that the seller should engage in 3PD? This paper sheds light on these fundamental questions. In particular, the comparison of the revenue performance between 3PD and uniform pricing is ambiguous overall when prices are set based on samples. This finding is in the nature of statistical learning under uncertainty: a curse of dimensionality, but also other small sample complications.
Subjects: 
empirical revenue maximization
information theory
optimal rate of convergence
Price discrimination
prior-independent pricing
JEL: 
C14
C44
D42
D82
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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