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The welfare effects of third-degree price discrimination with non-linear demand functions

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  • Simon Cowan

Abstract

The welfare effects of third-degree price discrimination are analyzed when demand in one market is an additively shifted version of demand in the other market and both markets are served with uniform pricing. Social welfare is lower with discrimination if the slope of demand is log-concave or the convexity of demand is non-decreasing in the price. The demand functions commonly used in models of imperfect competition satisfy at least one of these sufficient conditions.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 364.

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Date of creation: 01 Oct 2007
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Handle: RePEc:oxf:wpaper:364

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Keywords: Price Discrimination; Monopoly;

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  1. Christopher D. Carroll & Miles S. Kimball, 1995. "On the concavity of the consumption function," Finance and Economics Discussion Series 95-10, Board of Governors of the Federal Reserve System (U.S.).
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  9. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
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Cited by:
  1. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, vol. 122(2), pages 170-175.
  2. Aguirre Pérez, Iñaki, 2011. "Welfare Effects of Third-Degree Price Discrimination: Ippolito Meets Schmalensee and Varian," IKERLANAK 2011-54, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  3. Li, Youping, 2011. "Timing of investments and third degree price discrimination in intermediate good markets," MPRA Paper 36746, University Library of Munich, Germany.
  4. 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.
  5. 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.
  6. Simon GB Cowan & Simon Cowan, 2008. "When does third-degree price discrimination reduce social welfare, and when does it raise it?," Economics Series Working Papers 410, University of Oxford, Department of Economics.
  7. Arghya Ghosh & Alberto Motta, 2011. "Outsourcing with Heterogeneous Firms," Discussion Papers 2011-09, School of Economics, The University of New South Wales.
  8. Li, Youping, 2013. "Timing of investments and third degree price discrimination in intermediate good markets," Economics Letters, Elsevier, vol. 121(2), pages 316-320.

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