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Partial Price Discrimination By An Upstream Monopolist

Author

Listed:
  • Ramón Faulí-Oller

    (Universidad de Alicante)

  • Lluís Bru

    (Universitat de les Illes Balears)

  • Joel Sandonís

    (Universidad de Alicante)

Abstract

We analyze third degree price discrimination by an upstream monopolistto a continuum of heterogeneous downstream firms. The novelty of ourapproach is to recognize that customizing prices may be costly, whichintroduces an interesting trade-off. As a consequence, partial pricediscrimination arises in equilibrium. In particular, we show that inefficientdownstream firms receive personalized prices whereas efficient firms arecharged a uniform price. The extreme cases of complete price discriminationand uniform price arise in our setting as particular cases, depending on the costof customizing prices.

Suggested Citation

  • Ramón Faulí-Oller & Lluís Bru & Joel Sandonís, 2006. "Partial Price Discrimination By An Upstream Monopolist," Working Papers. Serie AD 2006-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2006-03
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    References listed on IDEAS

    as
    1. Qihong Liu & Konstantinos Serfes, 2004. "Quality of Information and Oligopolistic Price Discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 671-702, December.
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    More about this item

    Keywords

    Price discrimination; input markets;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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