A company can charge two different people two different prices even when those people can easily sell the product to each other for free.
Standard economic theory says that costless resale should force prices to stay the same because the person paying the lower price would just sell to the person paying more. This model proves that as long as customers have different income levels and preferences, a monopolist can still keep prices separate. Companies exploit the fact that a high-income buyer's time and reservation value are different from a low-income buyer's. We think of resale as a way to keep markets honest and prices fair. This research shows that even a perfect resale market cannot stop a clever company from squeezing every customer for their maximum payment.
Price Discrimination with Costless Resale
SSRN · 6014754
Textbook treatments of price discrimination conclude that costless resale should collapse discriminatory prices to a single price. We show that this conclusion need not hold when buyers' preferences are non-quasilinear. A monopolist sells an indivisible good to consumers with heterogeneous incomes who can resell costlessly. A lower purchase price leaves a low-income buyer with more disposable income and, when the good is normal, raises the buyer's reservation value for keeping it. The seller can