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Second degree price discrimination and natural monopoly

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  • Alfons J. Weichenrieder

Abstract

This 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 Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 56 (2004)
Issue (Month): 2 (04)
Pages: 189-200

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Handle: RePEc:bla:buecrs:v:56:y:2004:i:2:p:189-200

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Cited by:
  1. Andersson, Tommy, 2005. "Nonlinear Pricing and the Utility Possibility Set," Working Papers, Lund University, Department of Economics 2005:19, Lund University, Department of Economics.
  2. 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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