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Third-Degree Price Discrimination in the Presence of Subsidies

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  • Stefan Felder
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    Abstract

    According to a classical result, a move from uniform pricing to third-degree price discrimination only improves welfare if total output increases. In this paper I show that the classical result fails in the presence of subsidies. This finding appears to be relevant for the pharmaceutical sector where a consumer pays a fraction of the actual drug price due to health insurance coverage. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

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    Bibliographic Info

    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 7 (2006)
    Issue (Month): (November)
    Pages: 419-426

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    Handle: RePEc:bla:germec:v:7:y:2006:i::p:419-426

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    1. Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Springer Healthcare | Adis, vol. 13(3), pages 293-304.
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    Cited by:
    1. Rajat Acharyya & Maria D.C. Garcia-Alonso, 2008. "Income-Based Price Subsidies, Parallel Imports and Markets Access to New Drugs for the Poor," Studies in Economics 0820, Department of Economics, University of Kent.
    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. Edward Lopez & David Molina, 2010. "Third-Degree Price Discrimination: Apology Not Necessary," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(4), pages 383-397, December.
    4. Pedro Pita Barros & Xavier Martinez-Giralt, 2006. "On insurance and the cost-sharing of pharmaceutical R&D," Working Papers 293, Barcelona Graduate School of Economics.

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