Redistribution Through Market Segmentation

Abstract: We study how to optimally segment monopolistic markets with a redistributive objective. We characterize optimal redistributive segmentations and show that they (i) induce the seller to price progressively, i.e., richer consumers pay higher prices than poorer ones, and (ii) may not maximize consumer surplus, instead granting extra profits to the monopolist. We further show that optimal redistributive segmentations are implementable via price-based regulation.