1. cs234r Markets for Networks and Crowds B RENDAN L UCIER, M ICROSOFT R ESEARCH NE N ICOLE I MMORLICA, M ICROSOFT R ESEARCH NE

2. Lecture 7: Nima Haghpanah and Jason Hartline. Multi- Dimensional Virtual Values and Second-Degree Price Discrimination, working paper, 2016.

3. PRICE DISCRIMINATION: Examples. Vertical:

4. Examples. Vertical: e.g., movies in HD versus SD Horizontal: PRICE DISCRIMINATION:

5. Examples. Vertical: e.g., movies in HD versus SD Horizontal: e.g., color of product Challenge: multi-dimensional preferences PRICE DISCRIMINATION:

6. MODEL:

7. EXAMPLE:

8. wine: DVD vs theatre: High types have low sensitivity to quality. High types very picky about quality.

9. EXAMPLE: wine: DVD vs theatre: buy H buy L buy H buy L