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Third-Degree Price Discrimination, Consumption Externalities and Social Welfare

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  • Takanori Adachi

Abstract

This paper analyses monopolistic third-degree price discrimination in the presence of consumption externalities within two separate markets. Assuming linear inverse demands, we investigate an associated change in social welfare (the sum of the consumers' surpluses and the producer's profit) with the regime change from uniform pricing to price discrimination when both markets are open under either regime. It is shown that social welfare can improve even if total output is unaffected by the regime change. Moreover, it is possible that the sum of the consumers' surpluses also increases. Copyright (c) The London School of Economics and Political Science 2005.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 72 (2005)
Issue (Month): 285 (02)
Pages: 171-178

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Handle: RePEc:bla:econom:v:72:y:2005:i:285:p:171-178

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Cited by:
  1. Francisco Galera & Jesús M. Zaratiegui, 2003. "Welfare and Output in Third-Degree Price Discrimination: a Note," Faculty Working Papers 07/03, School of Economics and Business Administration, University of Navarra.
  2. Pedro Barros & Xavier Martinez-Giralt, 2008. "On international cost-sharing of pharmaceutical R&D," International Journal of Health Care Finance and Economics, Springer, vol. 8(4), pages 301-312, December.
  3. repec:ebl:ecbull:v:17:y:2007:i:2:p:1-10 is not listed on IDEAS
  4. 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.
  5. Shigeru Matsumoto & Hajime Sugeta, 2007. "Antitrust Policy and Environmental Protection," Economics Bulletin, AccessEcon, vol. 17(2), pages 1-10.

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