The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly
AbstractThis paper studies the welfare effects of third-degree price discrimination under oligopolistic competition with horizontal product differentiation. We derive a necessary and sufficient condition for price discrimination to improve social welfare: the degree of substitution must be sufficiently greater in the "strong" market (where the discriminatory price is higher than the uniform price) than in the "weak" market (where it is lower). It is verified, however, that consumer surplus is never improved; social welfare improves solely due to an increase in the firms' profits.
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Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 800.
Date of creation: Dec 2011
Date of revision:
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Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501
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More information through EDIRC
Third-degree price discrimination; Oligopoly; Social welfare; Horizontal product differentiation; Substitutability; Complementarity;
Other versions of this item:
- Takanori Adachi & Noriaki Matsushima, 2011. "The Welfare Effects of Third-Degree Price Discrimination in a Differentiated Oligopoly," ISER Discussion Paper 0800, Institute of Social and Economic Research, Osaka University.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-BEC-2011-12-13 (Business Economics)
- NEP-COM-2011-12-13 (Industrial Competition)
- NEP-IND-2011-12-13 (Industrial Organization)
- NEP-MKT-2011-12-13 (Marketing)
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