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Monopoly price discrimination with constant elasticity demand

Author

Listed:
  • Iñaki Aguirre

    (University of the Basque Country UPV/EHU)

  • Simon G. Cowan

    (University of Oxford)

Abstract

This paper presents new results on the welfare effects of third-degree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity difference between markets are high enough, then price discrimination not only can increase social welfare but also consumer surplus. We also obtain new bounds on the welfare change for log-convex demands.

Suggested Citation

  • Iñaki Aguirre & Simon G. Cowan, 2015. "Monopoly price discrimination with constant elasticity demand," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 329-340, October.
    • Handle: RePEc:spr:etbull:v:3:y:2015:i:2:d:10.1007_s40505-014-0063-3
    DOI: 10.1007/s40505-014-0063-3
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    1. Iñaki Aguirre & Simon G. Cowan, 2015. "Monopoly price discrimination with constant elasticity demand," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 329-340, October.
    2. Simon Cowan, 2017. "A Model of Third-Degree Price Discrimination with Positive Welfare Effects," Economics Series Working Papers 829, University of Oxford, Department of Economics.
    3. Simon Cowan, 2016. "Welfare-increasing third-degree price discrimination," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 326-340, May.
    4. Takanori Adachi & Takeshi Ebina, 2016. "Log-linear demand systems with differentiated products are inconsistent with the representative consumer approach," Economics Bulletin, AccessEcon, vol. 36(1), pages 260-267.
    5. John Vickers, 2020. "Direct Welfare Analysis of Relative Price Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 68(1), pages 40-51, March.
    6. Yong Chao & Babu Nahata, 2018. "Market foreclosure, output and welfare under second-degree price discrimination," Economics Bulletin, AccessEcon, vol. 38(4), pages 2116-2127.

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    More about this item

    Keywords

    Monopoly price discrimination; Social welfare; Constant elasticity demand;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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