Unequal Pricing in the Information Economy: Implications for Consumer Welfare

Journal of Business Ethics 56 (4):305-315 (2005)

This article presents an economic analysis of information good pricing and consumer welfare, and discusses the implications of price discrimination in the information economy. It argues that network externalities, coupled with information asymmetry, enable a dominant marketer to price unequally, extracting late adopters surplus to compensate for the loss from early adopters. In the short term, the minority early adopters benefit by paying less, but in the long term, the majority late adopters suffer by paying more. Considering that late adopters are likely to be at a disadvantage in resources, this discriminatory pricing amounts to the poor subsidizing the rich. Based on this analysis, implications for consumer welfare are discussed.
Keywords Information good  consumer welfare  unequal pricing  discriminatory pricing  network externalities  information asymmetry
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Reprint years 2005
DOI 10.1007/s10551-004-5262-7
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The Ethics of Price Discrimination.Juan M. Elegido - 2011 - Business Ethics Quarterly 21 (4):633-660.
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