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Monopoly Price Discrimination and Demand Curvature

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  • I�aki Aguirre
  • Simon Cowan
  • John Vickers

Abstract

This paper presents a general analysis of the effects of monopolistic third-degree price discrimination on welfare and output when all markets are served. Sufficient conditions — involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the different markets — are presented for discrimination to have negative or positive effects on social welfare and output. (JEL D42)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1601
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 4 (September)
Pages: 1601-15

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:4:p:1601-15

Note: DOI: 10.1257/aer.100.4.1601
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References

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  1. Victor Kaftal & Debashis Pal, 2008. "Third Degree Price Discrimination in Linear-Demand Markets: Effects on Number of Markets Served and Social Welfare," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 558-573, October.
  2. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
  3. Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-62, December.
  4. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08.
  5. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers 1989_30, Columbia University, Department of Economics.
  6. repec:ebl:ecbull:v:4:y:2008:i:11:p:1-11 is not listed on IDEAS
  7. Simon Cowan, 2007. "The welfare effects of third-degree price discrimination with non-linear demand functions," Economics Series Working Papers 364, University of Oxford, Department of Economics.
  8. Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-40, September.
  9. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
  10. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
  11. repec:ebl:ecbull:v:4:y:2006:i:23:p:1-6 is not listed on IDEAS
  12. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
  13. Nahata, Babu & Ostaszewski, Krzysztof & Sahoo, P K, 1990. "Direction of Price Changes in Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 80(5), pages 1254-58, December.
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