Should a multiproduct monopolist whose "average price" is capped by regulation be allowed to engage in (third-degree) price discrimination? If the cap applies to a price index with weights proportional to demands at uniform prices, then price discrimination benefits consumers as well as the firm. But if -- perhaps more realistically -- it is the firm's average revenue that is capped, then consumers prefer uniform pricing. In this case total output is higher when discrimination is allowed, which increases welfare, but marginal utilities differ across markets, which is inefficient, and the overall effect is ambiguous. A small amount of discrimination is desirable, however. It is better not to allow price discrimination if the price cap is close to the level of marginal cost. The consequences of tightening the price cap when discrimination is allowed are also examined.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (1991) Issue (Month): 4 (Winter) Pages: 571-581 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)