
Prof. Alessandro Gavazza of London School of Economics on mortgages, cars and market friction
Scientific Sense ®
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Is Price Discrimination a Good Policy?
The idea is very similar to traditional price discrimination. So when a seller price discriminates a cost among heterogeneous consumers, just by the fact that they are price discriminating, it is quite plausible that price discrimination benefits sellers. Uniform pricing would hurt some type of consumers. And the reduction in consumer surplus of these consumers is the main first order effects that reduces aggregate consumer surplus in the market.
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