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Imperfect Price Discrimination and Welfare

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  • Raymond Chiang
  • Chester S. Spatt

Abstract

We develop a model in which a monopolist uses differences across consumers in their valuation of time to imperfectly price discriminate. Though it is customary to analyse price discrimination problems by the calculus of variations after postulating a continuum of types, we assume a finite number of types and exploit the geometry and duality of the contract set and the structure of the programming specification. We analyse in detail the qualitative properties of the model's solution and show by construction that our results exhaust the implications of the model for equilibrium contract pairs. We show that imperfect discrimination is not bounded in welfare terms between perfect discrimination and single-price monopoly and that the deadweight loss, consumer surplus and output comparisons between single-price monopoly and imperfect discrimination are ambiguous.

Suggested Citation

  • Raymond Chiang & Chester S. Spatt, 1982. "Imperfect Price Discrimination and Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 155-181.
    • Handle: RePEc:oup:restud:v:49:y:1982:i:2:p:155-181.
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    File URL: http://hdl.handle.net/10.2307/2297268
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    Citations

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    Cited by:

    1. Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter.
    2. Pradeep Chintagunta & Jean-Pierre Dubé & Vishal Singh, 2003. "Balancing Profitability and Customer Welfare in a Supermarket Chain," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 111-147, March.
    3. Fischer, Carolyn, 2004. "Who Pays for Energy Efficiency Standards?," RFF Working Paper Series dp-04-11, Resources for the Future.
    4. Larry Karp & Jeffrey M. Perloff, 2005. "When Promoters Like Scalpers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 477-508, June.
    5. Casey B. Mulligan, 2009. "Means-Tested Mortgage Modification: Homes Saved or Income Destroyed?," NBER Working Papers 15281, National Bureau of Economic Research, Inc.
    6. Zhang, Xubing & Jiang, Bo, 2014. "Increasing Price Transparency: Implications of Consumer Price Posting for Consumers' Haggling Behavior and a Seller's Pricing Strategies," Journal of Interactive Marketing, Elsevier, vol. 28(1), pages 68-85.
    7. Miceli, Thomas J., 1999. "Settlement delay as a sorting device," International Review of Law and Economics, Elsevier, vol. 19(2), pages 265-274, June.
    8. Preyas S. Desai & Devavrat Purohit, 2004. "“Let Me Talk to My Manager”: Haggling in a Competitive Environment," Marketing Science, INFORMS, vol. 23(2), pages 219-233, August.
    9. Liang Guo, 2023. "Gathering Information Before Negotiation," Management Science, INFORMS, vol. 69(1), pages 200-219, January.
    10. Chester Spatt, 1983. "The objectives of private and public judges," Public Choice, Springer, vol. 41(1), pages 139-143, January.
    11. Joo, Mingyu & Mazumdar, Tridib & Raj, S.P., 2012. "Bidding Strategies and Consumer Savings in NYOP Auctions," Journal of Retailing, Elsevier, vol. 88(1), pages 180-188.
    12. Ian Novos & Michael Waldman, 1983. "The Social Welfare Consequences of Limiting Nonexcludability: An Analytical Approach," UCLA Economics Working Papers 295, UCLA Department of Economics.
    13. Steven Matthews & John Moore, 1984. "Monopoly Provision of Product Quality and Warranties," Discussion Papers 585R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    14. Tåg, Joacim, 2009. "Paying to remove advertisements," Information Economics and Policy, Elsevier, vol. 21(4), pages 245-252, November.
    15. Liang Guo, 2022. "Strategic Communication Before Price Haggling: A Tale of Two Orientations," Marketing Science, INFORMS, vol. 41(5), pages 922-940, September.
    16. Michael Waldman, 1983. "Optimal Pricing Given Transaction Costs: The Case of Reserve Versus General Admission Seating," UCLA Economics Working Papers 284, UCLA Department of Economics.
    17. Fischer, Carolyn, 2005. "On the importance of the supply side in demand-side management," Energy Economics, Elsevier, vol. 27(1), pages 165-180, January.
    18. Volker Nocke & Martin Peitz, 2003. "Monopoly Pricing under Demand Uncertainty: Final Sales versus Introductory ffers," PIER Working Paper Archive 03-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    19. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-467, March.
    20. Giaume, Stephanie & Guillou, Sarah, 2004. "Price discrimination and concentration in European airline markets," Journal of Air Transport Management, Elsevier, vol. 10(5), pages 305-310.

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