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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.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 42 (2004)
Issue (Month): 3 (July)
Pages: 402-412

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Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:402-412

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Cited by:
  1. Pascal Courty & Mario Pagliero, 2009. "The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry," Economics Working Papers ECO2009/04, European University Institute.
  2. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
  3. Pascal Courty, 2009. "Unpriced Quality," Economics Working Papers ECO2009/16, European University Institute.
  4. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009. "Competition and price discrimination in the market for mailing lists," Quantitative Marketing and Economics, Springer, vol. 7(2), pages 147-179, June.
  5. Cohen, Andrew, 2008. "Package size and price discrimination in the paper towel market," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 502-516, March.
  6. Alderighi, Marco, 2010. "Fare dispersions in airline markets: A quantitative assessment of theoretical explanations," Journal of Air Transport Management, Elsevier, vol. 16(3), pages 144-150.
  7. Pascal Courty & Mario Pagliero, 2009. "Price Discrimination in the Concert Industry," Economics Working Papers ECO2009/05, European University Institute.
  8. Smith, Vincent H. & Johnson, James B., 2005. "Environmental Regulation, Market Power and Price Discrimination in the Agricultural Chemical Industry," 2005 Annual meeting, July 24-27, Providence, RI 19520, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
  10. Paolo Bertoletti, 2009. "On the output criterion for price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 2951-2956.
  11. Awudu Abdulai & Christian Kuhlgatz & Silke Schmitz, 2009. "Empirical investigation of price setting and quantity surcharges in the German food sector," Agribusiness, John Wiley & Sons, Ltd., vol. 25(3), pages 331-350.
  12. Christos Cabolis & Sofronis Clerides & Ioannis Ioannou & Daniel Senft, 2005. "A Textbook Example of International Price Discrimination," Yale School of Management Working Papers amz2640, Yale School of Management, revised 01 Aug 2008.
  13. Haizhen Lin & Yijia Wang, 2012. "Competition and Price Discrimination in the Parking Garage Industry," Working Papers 2012-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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