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Price Discrimination with Differentiated Products: Definition and Identification

Author

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  • Sofronis K. Clerides

Abstract

There is no widely accepted definition of price discrimination with differentiated products. Either absolute price-cost differences or percentage price-cost markups are used as benchmarks for comparison. I show that the two criteria are qualitatively different: One may indicate price discrimination when the other does not. Moreover, anything other than marginal cost pricing will be identified as price discrimination by at least one of the two. I propose choosing a criterion based on the cost of arbitrage in the market under examination. Because this is often difficult to determine, it is advisable to always report results with both measures. (JEL L1, D4) Copyright 2004, Oxford University Press.

Suggested Citation

  • Sofronis K. Clerides, 2004. "Price Discrimination with Differentiated Products: Definition and Identification," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 402-412, July.
  • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:402-412
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    File URL: http://hdl.handle.net/10.1093/ei/cbh069
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    Citations

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    Cited by:

    1. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters,in: A Handbook of Transport Economics, chapter 22 Edward Elgar Publishing.
    2. Cohen, Andrew, 2008. "Package size and price discrimination in the paper towel market," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 502-516, March.
    3. Pascal Courty & Mario Pagliero, 2012. "The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 359-369, February.
    4. Courty, Pascal, 2011. "Unpriced quality," Economics Letters, Elsevier, vol. 111(1), pages 13-15, April.
    5. Haizhen Lin & Isabelle Yijia Wang, 2015. "Competition and Price Discrimination: Evidence from the Parking Garage Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 522-548, September.
    6. Cabolis, Christos & Clerides, Sofronis & Ioannou, Ioannis & Senft, Daniel, 2007. "A textbook example of international price discrimination," Economics Letters, Elsevier, vol. 95(1), pages 91-95, April.
    7. Stephen Davies, Catherine Waddams Price, and Chris M. Wilson, 2014. "Nonlinear Pricing and Tariff Differentiation: Evidence from the British Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    8. Courty, Pascal & Pagliero, Mario, 2012. "The Pricing of Art and the Art of Pricing: Pricing Styles in the Concert Industry," CEPR Discussion Papers 8967, C.E.P.R. Discussion Papers.
    9. Paolo Bertoletti, 2009. "On the output criterion for price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 2951-2956.
    10. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
    11. Awudu Abdulai & Christian Kuhlgatz & Silke Schmitz, 2009. "Empirical investigation of price setting and quantity surcharges in the German food sector," Agribusiness, John Wiley & Sons, Ltd., vol. 25(3), pages 331-350.
    12. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
    13. Pascal Courty & Mario Pagliero, 2009. "Price Discrimination in the Concert Industry," Economics Working Papers ECO2009/05, European University Institute.
    14. Charles Angelucci & Julia Cage, 2015. "Newspapers in Times of Low Advertising Revenues," Sciences Po publications info:hdl:2441/26t617gatp8, Sciences Po.
    15. Smith, Vincent H. & Johnson, James B., 2005. "Environmental Regulation, Market Power and Price Discrimination in the Agricultural Chemical Industry," 2005 Annual meeting, July 24-27, Providence, RI 19520, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Haizhen Lin & Yijia Wang, 2012. "Competition and Price Discrimination in the Parking Garage Industry," Working Papers 2012-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    17. Alderighi, Marco, 2010. "Fare dispersions in airline markets: A quantitative assessment of theoretical explanations," Journal of Air Transport Management, Elsevier, vol. 16(3), pages 144-150.
    18. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009. "Competition and price discrimination in the market for mailing lists," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 147-179, June.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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