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Third-Degree Price Discrimination with Interdependent Demands

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  • Layson, Stephen K

Abstract

This paper analyzes the price, output, and welfare effects of third-degree price discrimination for a monopolist who sells in two interdependent markets. The case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes. The economic effects of price discrimination are shown to depend on the type and strength of demand interdependence, the curvature of the demands, and the slope of marginal cost. The circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed. Copyright 1998 by Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 46 (1998)
Issue (Month): 4 (December)
Pages: 511-24

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Handle: RePEc:bla:jindec:v:46:y:1998:i:4:p:511-24

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Cited by:
  1. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
  2. Takanori Adachi & Noriaki Matsushima, 2011. "The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly," KIER Working Papers 800, Kyoto University, Institute of Economic Research.
  3. Mujumdar, Sudesh & Pal, Debashis, 2005. "Do price ceilings abroad increase U.S. drug prices?," Economics Letters, Elsevier, vol. 87(1), pages 9-13, April.
  4. Chen, Yongmin & Schwartz, Marius, 2012. "Beyond price discrimination: welfare under differential pricing when costs also differ," MPRA Paper 43393, University Library of Munich, Germany.
  5. Yongmin Chen and Marius Schwartz, 2013. "Differential Pricing When Costs Differ: A Welfare Analysis," Working Papers gueconwpa~13-13-01, Georgetown University, Department of Economics.
  6. Tomohisa Okada & Takanori Adachi, 2013. "Third-Degree Price Discrimination, Consumption Externalities, and Market Opening," Journal of Industry, Competition and Trade, Springer, vol. 13(2), pages 209-219, June.
  7. 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.
  8. Anam, Mahmudul & Chiang, Shin-Hwan, 2006. "Price discrimination and social welfare with correlated demand," Journal of Economic Behavior & Organization, Elsevier, vol. 61(1), pages 110-122, September.
  9. Mahmudul Anam & Shin-Hwan Chiangy, 1999. "Price Discrimination and Social Welfare with Demand Uncertainty," Working Papers 1999_04, York University, Department of Economics.

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