Two duopolists compete in price on the market for a homogeneous product. They can 'profile' consumers, i.e., identify their valuations with some probability. If both firms can profile consumers but with different abilities, then they achieve positive expected profits at equilibrium. This...

The paper points up limitations in the standard undergraduate treatment of third-degree price discrimination by monopolists. While such treatments allude to qualitative distinctions between higher and lower priced alternatives, failure to capture those distinctions in underlying cost and demand...