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Third Degree Price Discrimination in Linear-Demand Markets: Effects on Number of Markets Served and Social Welfare

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  • Victor Kaftal

    ()
    (Department of Mathematical Sciences, 839 C Old Chemistry Building, University of Cincinnati, Cincinnati, OH 45221, USA)

  • Debashis Pal

    ()
    (Department of Economics, 1204 Crosley Tower, University of Cincinnati, Cincinnati, OH 45221)

Abstract

We analyze the welfare impact of monopolistic third degree price discrimination when all markets are not necessarily served by uniform pricing. We consider n markets with linear demand curves. Each demand is characterized by the price intercept of the demand curve and by the size of the market, as measured by the area under the demand curve. Based on these two exogenous parameters, we establish the necessary and sufficient conditions to determine the number of markets to be served under uniform pricing and the direction of the welfare change under third degree price discrimination.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 75 (2008)
Issue (Month): 2 (October)
Pages: 558-573

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Handle: RePEc:sej:ancoec:v:75:2:y:2008:p:558-573

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Cowan, Simon & Vickers, John & Aguirre Pérez, Iñaki, 2009. "Monopoly Price Discrimination and Demand Curvature," IKERLANAK 2009-39, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  2. Yann Braouezec, 2013. "The Welfare Effects of Regulating the Number of Market Segments," Working Papers 2013-ECO-11, IESEG School of Management.
  3. Tomohisa Okada & Takanori Adachi, 2013. "Third-Degree Price Discrimination, Consumption Externalities, and Market Opening," Journal of Industry, Competition and Trade, Springer, vol. 13(2), pages 209-219, June.
  4. Braouezec, Yann, 2012. "Customer-class pricing, parallel trade and the optimal number of market segments," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 605-614.

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