Price Discrimination with Costly Consumer Arbitrage
AbstractConsumer arbitrage affects discriminatory pricing across markets in several ways. If all consumers face the same arbitrage costs, a monopolist's profit increases with arbitrage costs, and overall welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second market even if there is no local demand - it can use the second market to discriminate across consumers in the first market on the basis of their costs. When there is also local demand in the second market, welfare may be increasing in arbitrage costs, even if output falls.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1994039.
Date of creation: 01 Aug 1994
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Other versions of this item:
- Simon P. Anderson & Victor Ginsburgh, 1999. "Price discrimination with costly consumer arbitrage," ULB Institutional Repository 2013/1699, ULB -- Universite Libre de Bruxelles.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
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- Hamilton, Jonathan H., 2012. "The effect of Canadian imports on prescription drug prices in the U.S," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1003-1008.
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