Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry
AbstractWe 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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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 35 (2004)
Issue (Month): 4 (Winter)
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Other versions of this item:
- V. Bhaskar & Ted To, 2002. "Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry," Economics Discussion Papers, University of Essex, Department of Economics 537, University of Essex, Department of Economics.
- 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
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.:
- Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Bergemann, Dirk & Valimaki, Juuso, 2003.
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- Dirk Bergemann & Juuso Valimaki, 1998. "Dynamic Common Agency," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Stuart, Harborne Jr., 2004. "Efficient spatial competition," Games and Economic Behavior, Elsevier, Elsevier, vol. 49(2), pages 345-362, November.
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