Behavioural Reactions to Price Discrimination

Are Price discrimination can increase social welfare and the profit of sellers. Yet, sellers often avoid charging buyers with different valuations different prices for identical products. The avoidance of price discrimination is difficult to reconcile with the standard economic model of rational and selfish decision-makers and results in apparent inefficiently functioning markets.

In his current research Andreas Leibbrandt uses a novel experimental framework to investigate the occurrence and effect of price discrimination in different market and information conditions. He studies trades of real items between sellers and buyers in experimental markets where he manipulates seller incentives and whether buyers have information about price discrimination. These manipulations reveal in which environments sellers are more likely to avoid and buyers are less likely to accept price discrimination. Further, these manipulations help understanding whether and which notions of fairness constrain price discrimination.

One main goal of this project is to provide public and private institutions with information about the circumstances under which price discrimination can be used as a tool to increase revenues. Examples include the scope and limitations of offering public services at different prices.

Andreas Leibbrandt is a Senior Lecturer at Monash University. He is broadly interested in cooperativeness and competitiveness and uses field and lab experiments to address questions in public, environmental, labour, and organisational and personnel economics. He has published in the Review of Economic Studies, PNAS, Management Science, Journal of Public Economics, Journal of Environmental Economics and Management and other journals. Mr Leibbrandt’s PhD is from the University of Zurich and he was a Postdoctoral Fellow at the University of Chicago and the Ostrom Workshop at Indiana University.