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 ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/1699.
Date of creation: 1999
Date of revision:
Publication status: Published in: Review of International Economics (1999) v.7,p.126-139
Other versions of this item:
- ANDERSON, Simon P. & GINSBURGH , Victor A., 1994. "Price Discrimination with Costly Consumer Arbitrage," CORE Discussion Papers, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1994039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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, Elsevier, vol. 42(6), pages 1003-1008.
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