Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339350 
Year of Publication: 
2026
Series/Report no.: 
ECONtribute Discussion Paper No. 387
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer's search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers.
Subjects: 
Price Discrimination
Search Costs
Consumer Search Market
JEL: 
D83
L13
D18
D43
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.