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Market Opening under Third-Degree Price Discrimination

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  • Layson, Stephen K

Abstract

There are frequently regulatory and antitrust pressures for firms to cease price discrimination and practice uniform pricing. Such pressures, however, generally have negative welfare consequences when they lead to weaker markets not being served. This paper derives conditions that determine when price discrimination will induce service to a market (market opening) that would not be served under a regime of price uniformity. The factors that favor market opening under price discrimination are a large market share for the strong market, profit margins in the two markets that are far apart, and concave rather than convex demand curves. Copyright 1994 by Blackwell Publishing Ltd.

Suggested Citation

  • Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September.
  • Handle: RePEc:bla:jindec:v:42:y:1994:i:3:p:335-40
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    Cited by:

    1. Robert Ritz, 2013. "Price Discrimination and Limits to Arbitrage in Global LNG Markets," Cambridge Working Papers in Economics 1340, Faculty of Economics, University of Cambridge.
    2. Poudou, Jean-Christophe & Roland, Michel, 2014. "Efficiency of uniform pricing in universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 141-152.
    3. M Borland & R Howson, 2016. "A problem with the course presentation of the single-price alternative to 3rd-degree price discrimination," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 87-97, March.
    4. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    5. Fabian Herweg & Daniel Müller, 2012. "Price Discrimination in Input Markets: Downstream Entry and Efficiency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 773-799, September.
    6. Garella, Paolo G., 2002. "Price discrimination and the location choice of a durable goods monopoly," Regional Science and Urban Economics, Elsevier, vol. 32(6), pages 765-773, November.
    7. Yann Braouezec, 2009. "Incomplete third-degree price discrimination, and market partition problem," Economics Bulletin, AccessEcon, vol. 29(4), pages 2908-2917.
    8. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    9. Tomohisa Okada & Takanori Adachi, 2013. "Third-Degree Price Discrimination, Consumption Externalities, and Market Opening," Journal of Industry, Competition and Trade, Springer, vol. 13(2), pages 209-219, June.
    10. Aguirre Pérez, Iñaki, 2009. "Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination," IKERLANAK 2009-38, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    11. Hornbeck, Richard A., 2005. "Price Discrimination and Smuggling of AIDS Drugs," Scholarly Articles 11186012, Harvard University Department of Economics.
    12. repec:bpj:bejtec:v:18:y:2018:i:1:p:6:n:11 is not listed on IDEAS
    13. Aguirre Pérez, Iñaki, 2009. "Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination," IKERLANAK 2009-38, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    14. Wang, Zhu & Wright, Julian, 2017. "Should Platforms be Allowed to Charge Ad Valorem Fees?," Working Paper 17-5, Federal Reserve Bank of Richmond.
    15. Markus Dertwinkel-Kalt & Justus Haucap & Christian Wey, 2016. "Procompetitive dual pricing," European Journal of Law and Economics, Springer, vol. 41(3), pages 537-557, June.
    16. Hong Hwang & Yan-Shu Lin & Chao-Cheng Mai, 2007. "Spatial pricing, optimal location and social welfare with consumer arbitrage," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(3), pages 619-638, September.
    17. Edward Lopez & David Molina, 2010. "Third-Degree Price Discrimination: Apology Not Necessary," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 383-397, December.
    18. 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.
    19. Álvaro Bustos, 2013. "Market Separation, Negative Consumption Externalities and Capacity Constraints," Documentos de Trabajo 448, Instituto de Economia. Pontificia Universidad Católica de Chile..
    20. Tsuyoshi Toshimitsu, 2014. "Economic Integration, Quality Choice, and Monopoly," Discussion Paper Series 118, School of Economics, Kwansei Gakuin University, revised May 2014.
    21. Alexandrov, Alexei & Deb, Joyee, 2012. "Price discrimination and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 615-623.

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