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Income Dispersion And Price Discrimination

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  • Yong He
  • Guang‐Zhen Sun

Abstract

. This paper analyses the effects of inter‐market and intra‐market income heterogeneities on output and social welfare under uniform pricing and differential pricing regimes by considering a finite number of markets. We first derive the linear demand curve in each market under plausible conditions, and then show that more markets (and consumers) are excluded under uniform pricing the higher are the inter‐market income differences. We also show that adding markets, even of lower income levels than those of existing markets, helps to decrease prices and thus cause more markets to be served. Implications of intra‐market income dispersion are also explored.

Suggested Citation

  • Yong He & Guang‐Zhen Sun, 2006. "Income Dispersion And Price Discrimination," Pacific Economic Review, Wiley Blackwell, vol. 11(1), pages 59-74, February.
    • Handle: RePEc:bla:pacecr:v:11:y:2006:i:1:p:59-74
    DOI: 10.1111/j.1468-0106.2006.00299.x
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    1. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    2. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654, Elsevier.
    3. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

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    3. Victor Kaftal & Debashis Pal, 2008. "Third Degree Price Discrimination in Linear‐Demand Markets: Effects on Number of Markets Served and Social Welfare," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 558-573, August.
    4. Yann Braouezec, 2013. "The Welfare Effects of Regulating the Number of Market Segments," Working Papers 2013-ECO-11, IESEG School of Management.
    5. Braouezec, Yann, 2016. "On the welfare effects of regulating the number of discriminatory prices," Research in Economics, Elsevier, vol. 70(4), pages 588-607.

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