Timing of investments and third degree price discrimination in intermediate good markets
This paper studies the discriminatory pricing of an intermediate good and compares two models with a different timing of investments undertaken by the downstream firms, before or after the upstream monopolist sets the input prices. When the more efficient downstream firm is charged a higher price than the less efficient firm in the first model, in the second model when investments are made after input prices are set, it may be charged a lower price due to the additional indirect effect of input prices on derived demands (via the change of investment incentives). It is illustrated that, with linear market demand and quadratic investment cost, whether a lower or higher price is charged to the more efficient firm depends on the ratio of the linear and quadratic coefficients in the cost function.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon Cowan, 2007.
"The welfare effects of third-degree price discrimination with non-linear demand functions,"
Economics Series Working Papers
364, University of Oxford, Department of Economics.
- Simon Cowan, 2007. "The welfare effects of third-degree price discrimination with nonlinear demand functions," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 419-428, 06.
- Roman Inderst & Tommaso Valletti, 2006.
"Price Discrimination in Input Markets,"
CEIS Research Paper
73, Tor Vergata University, CEIS.
- Schmalensee, Richard., 1980.
"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March.
- Yoshihiro Yoshida, 2000. "Third-Degree Price Discrimination in Input Markets: Output and Welfare," American Economic Review, American Economic Association, vol. 90(1), pages 240-246, March.
- DeGraba, Patrick, 1990. "Input Market Price Discrimination and the Choice of Technology," American Economic Review, American Economic Association, vol. 80(5), pages 1246-53, December.
- d'ASPREMONT, Claude & JACQUEMIN, Alexis, .
"Cooperative and noncooperative R&D in duopoly with spillovers,"
CORE Discussion Papers RP
-823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
- Simon Cowan, 2012.
"Third-Degree Price Discrimination and Consumer Surplus,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 60(2), pages 333-345, 06.
- Simon GB Cowan & Simon Cowan, 2009. "Third-Degree Price Discrimination and Consumer Surplus," Economics Series Working Papers 462, University of Oxford, Department of Economics.
- Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-62, December.
- I�aki Aguirre & Simon Cowan & John Vickers, 2010.
"Monopoly Price Discrimination and Demand Curvature,"
American Economic Review,
American Economic Association, vol. 100(4), pages 1601-15, September.
- 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.
- Roman Inderst & Greg Shaffer, 2009. "Market power, price discrimination, and allocative efficiency in intermediate-goods markets," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 658-672.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:121:y:2013:i:2:p:316-320. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.