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Third-Degree Price Discrimination with Interdependent Demands

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  • Layson, Stephen K

Abstract

This paper analyzes the price, output, and welfare effects of third-degree price discrimination for a monopolist who sells in two interdependent markets. The case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes. The economic effects of price discrimination are shown to depend on the type and strength of demand interdependence, the curvature of the demands, and the slope of marginal cost. The circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed. Copyright 1998 by Blackwell Publishing Ltd

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  • Layson, Stephen K, 1998. "Third-Degree Price Discrimination with Interdependent Demands," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 511-524, December.
  • Handle: RePEc:bla:jindec:v:46:y:1998:i:4:p:511-24
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    References listed on IDEAS

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    Cited by:

    1. Mahmudul Anam & Shin-Hwan Chiangy, 1999. "Price Discrimination and Social Welfare with Demand Uncertainty," Working Papers 1999_04, York University, Department of Economics.
    2. Masanori Mitsutsune & Takanori Adachi, 2014. "Estimating noncooperative and cooperative models of bargaining: an empirical comparison," Empirical Economics, Springer, pages 669-693.
    3. Mujumdar, Sudesh & Pal, Debashis, 2005. "Do price ceilings abroad increase U.S. drug prices?," Economics Letters, Elsevier, pages 9-13.
    4. Yongmin Chen & Marius Schwartz, 2015. "Differential pricing when costs differ: a welfare analysis," RAND Journal of Economics, RAND Corporation, pages 442-460.
    5. Charles Horioka & Reiko Kanda, 2010. "Revitalizing the Japanese Economy by Socializing Risk," Japanese Economy, Taylor & Francis Journals, pages 3-36.
    6. Anam, Mahmudul & Chiang, Shin-Hwan, 2006. "Price discrimination and social welfare with correlated demand," Journal of Economic Behavior & Organization, Elsevier, pages 110-122.
    7. Serena Frazzoni & Maria Luisa Mancusi & Zeno Rotondi & Maurizio Sobrero & Andrea Vezzulli, 2014. "Innovation and export in SMEs: the role of relationship banking," Working Papers Department of Economics 2014/18, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    8. Chen, Yongmin & Schwartz, Marius, 2012. "Beyond price discrimination: welfare under differential pricing when costs also differ," MPRA Paper 43393, University Library of Munich, Germany.
    9. Takanori Adachi & Noriaki Matsushima, 2014. "The Welfare Effects Of Third-Degree Price Discrimination In A Differentiated Oligopoly," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1231-1244, July.
    10. Martin D Evans, 2012. "International Capital Flows and Debt Dynamics," IMF Working Papers 12/175, International Monetary Fund.
    11. Tomohisa Okada & Takanori Adachi, 2013. "Third-Degree Price Discrimination, Consumption Externalities, and Market Opening," Journal of Industry, Competition and Trade, Springer, pages 209-219.
    12. Kim, Jeong-Yoo & Lee, Myeong Ho & Berg, Nathan, 2016. "Peak-load pricing in duopoly," Economic Modelling, Elsevier, pages 47-54.
    13. repec:ctc:serie1:def19 is not listed on IDEAS
    14. Chin-Sheng Chen, 2017. "Price Discrimination in Input Markets and Quality Differentiation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 367-388, May.
    15. Aloui, Chokri & Jebsi, Khaïreddine, 2016. "Platform optimal capacity sharing: Willing to pay more does not guarantee a larger capacity share," Economic Modelling, Elsevier, pages 276-288.
    16. Trégouët, Thomas, 2015. "Gender-based price discrimination in matching markets," International Journal of Industrial Organization, Elsevier, pages 34-45.
    17. Edward Lopez & David Molina, 2010. "Third-Degree Price Discrimination: Apology Not Necessary," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 383-397.
    18. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
    19. Achim I. Czerny & Anming Zhang, 2014. "Third-degree Price Discrimination in the Presence of Congestion Externality," Tinbergen Institute Discussion Papers 14-140/VIII, Tinbergen Institute.

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