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Welfare and output in third-degree price discrimination: A note

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  • Galera, Francisco
  • Zaratiegui, Jesus M.

Abstract

In this note I provide examples to show that, contrary to what is widely believed, when changing from an uniform price to a third-degree price discrimination situation, an improvement in welfare is possible with output reduction, if there is more than one firm.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 24 (2006)
Issue (Month): 3 (May)
Pages: 605-611

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Handle: RePEc:eee:indorg:v:24:y:2006:i:3:p:605-611

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Web page: http://www.elsevier.com/locate/inca/505551

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References

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  1. Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-62, December.
  2. Adachi, Takanori, 2002. "A Note on 'Third-Degree Price Discrimination with Interdependent Demands.'," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 235, June.
  3. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
  4. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  5. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  6. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
  7. Yoshihiro Yoshida, 2000. "Third-Degree Price Discrimination in Input Markets: Output and Welfare," American Economic Review, American Economic Association, vol. 90(1), pages 240-246, March.
  8. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
  9. Takanori Adachi, 2005. "Third-Degree Price Discrimination, Consumption Externalities and Social Welfare," Economica, London School of Economics and Political Science, vol. 72(285), pages 171-178, 02.
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Citations

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Cited by:
  1. repec:ebl:ecbull:v:4:y:2006:i:23:p:1-6 is not listed on IDEAS
  2. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
  3. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
  4. 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.
  5. Yeung-Nan Shieh, 2006. "Monopsonistic wage discrimination and employment effect under conditions of constant labor supply elasticity," Economics Bulletin, AccessEcon, vol. 4(32), pages 1-4.
  6. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
  7. Ebenezer Tetteh, 2009. "Implementing differential pricing for essential medicines via country-specific bilateral negotiated discounts," Applied Health Economics and Health Policy, Springer, vol. 7(2), pages 71-89, June.
  8. repec:ebl:ecbull:v:4:y:2006:i:32:p:1-4 is not listed on IDEAS
  9. repec:ebl:ecbull:v:17:y:2007:i:2:p:1-10 is not listed on IDEAS
  10. Shigeru Matsumoto & Hajime Sugeta, 2007. "Antitrust Policy and Environmental Protection," Economics Bulletin, AccessEcon, vol. 17(2), pages 1-10.
  11. 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.

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