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The Elimination of Price Discrimination and Strategic Incentive of R&D

Author

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  • Sang-Ho Lee

    (Sungkyul University)

Abstract

This article investigates the welfare consequences of the elimination of price discrimination and points out the firm's strategic incentive of R&D against the regulator. It is shown that discrimination regulation aimed at preventing welfare-reducing price discrimination may induce the monopolist to invest a lower R&D and make the final outcome that is socially suboptimal compared to the case of no regulation. This article also discusses the second-best way of achieving an efficient regulatory policy by considering the firm's opportunistic behaviors and the regulator's possibility of commitment.

Suggested Citation

  • Sang-Ho Lee, 1999. "The Elimination of Price Discrimination and Strategic Incentive of R&D," Korean Economic Review, Korean Economic Association, vol. 15, pages 199-212.
    • Handle: RePEc:kea:keappr:ker-199906-15-1-11
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    More about this item

    Keywords

    Third-degree Price Discrimination; Strategic R&D Incentives;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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