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Price Discrimination with Differentiated Products: Definition and Identification

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  • Sofronis K. Clerides

Abstract

There is no widely accepted definition of price discrimination with differentiated products. Either absolute price-cost differences or percentage price-cost markups are used as benchmarks for comparison. I show that the two criteria are qualitatively different: One may indicate price discrimination when the other does not. Moreover, anything other than marginal cost pricing will be identified as price discrimination by at least one of the two. I propose choosing a criterion based on the cost of arbitrage in the market under examination. Because this is often difficult to determine, it is advisable to always report results with both measures. (JEL L1, D4) Copyright 2004, Oxford University Press.

Suggested Citation

  • Sofronis K. Clerides, 2004. "Price Discrimination with Differentiated Products: Definition and Identification," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 402-412, July.
    • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:402-412
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    File URL: http://hdl.handle.net/10.1093/ei/cbh069
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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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