Second degree price discrimination and natural monopoly
AbstractThis paper considers the efficiency of a contestable natural monopoly if consumers are heterogeneous and the monopolist can differentiate prices imperfectly. The paper shows that a "no-distortion-at-the-top" result, which is standard in models with restricted entry, may also appear in a contestable market. Depending on cost and demand structures, first best efficiency can also be a sustainable equilibrium. However, due to the existence of a continuum of equilibria, first best efficiency is not guaranteed. Most notably, even a stable "distortion-at-the-top" result is possible. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2004.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Bulletin of Economic Research.
Volume (Year): 56 (2004)
Issue (Month): 2 (04)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378
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- Andersson, Tommy, 2005. "Nonlinear Pricing and the Utility Possibility Set," Working Papers, Lund University, Department of Economics 2005:19, Lund University, Department of Economics.
- Kawasaki, Akio, 2008. "Network effects, heterogeneous time value and network formation in the airline market," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 38(4), pages 388-403, July.
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