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Free entry and welfare with price discrimination

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Author Info

  • Francisco Galera

    ()
    (Universidad de Navarra)

  • Pedro Mendi

    ()
    (Universidad de Navarra)

Abstract

We show that if firms in an industry engage in third-degree price discrimination, the number of firms in the free-entry equilibrium may be inefficiently low. This result is obtained even with set up costs and a price above marginal cost. We discuss the relevant implications that our result has for policy design.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I4-P297.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 4 ()
Pages: 3268-3274

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Handle: RePEc:ebl:ecbull:eb-11-00117

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Related research

Keywords: Free entry; Social welfare; Third-degree price discrimination; Oligopoly; Business stealing.;

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  1. Arghya Ghosh & Hodaka Morita, 2007. "Free entry and social efficiency under vertical oligopoly," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 541-554, 06.
  2. Ghosh, Arghya & Morita, Hodaka, 2007. "Social desirability of free entry: A bilateral oligopoly analysis," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 925-934, October.
  3. C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
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