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Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry Author info | Abstract | Publisher info | Download info | Related research | Statistics V. Bhaskar () (University of Essex)
Ted To () (Bureau of Labor Statistics)
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We analyze models of product differentiation with perfect price discrimination and free entry. With a fixed number of firms, and in the absence of coordination failures, perfect price discrimination provides incentives for firms to choose product characteristics in a socially optimal way. However, with free entry, the number of firms is always excessive. Our results apply to a large class of models of product differentiation. They also apply to models of common agency or lobbying with free entry and imply that one has excessive entry into the ranks of the principals.
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Article provided by The RAND Corporation in its journal RAND Journal of Economics .
Volume (Year): 35 (2004)
Issue (Month): 4 (Winter)
Pages: 762-776
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Handle: RePEc:rje:randje:v:35:y:2004:4:p:762-776Contact details of provider: Web page: http://www.rje.org
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Keywords: Production ; Pricing ; and Market Structure ; Size Distribution of Firms (Concentration ; Product Differentiation ; Entry and Exit) Market Structure ; Firm Strategy ; and Market Performance: Oligopoly and Other Imperfect Markets ; monopolistic competition ; contestable markets Differentiation ; Entry ; Firm ; Firms ; Free Entry ; Price Discrimination ; Product Differentiation ; Other versions of this item:
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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