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Third‐Degree Price Discrimination in the Presence of Subsidies

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  • Stefan Felder

Abstract

. According to a classical result, a move from uniform pricing to third‐degree price discrimination only improves welfare if total output increases. In this paper I show that the classical result fails in the presence of subsidies. This finding appears to be relevant for the pharmaceutical sector where a consumer pays a fraction of the actual drug price due to health insurance coverage.

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  • Stefan Felder, 2006. "Third‐Degree Price Discrimination in the Presence of Subsidies," German Economic Review, Verein für Socialpolitik, vol. 7(4), pages 419-426, November.
    • Handle: RePEc:bla:germec:v:7:y:2006:i:4:p:419-426
    DOI: 10.1111/j.1468-0475.2006.00127.x
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    References listed on IDEAS

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    1. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
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