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An empirical investigation of the welfare effects of banning wholesale price discrimination

  • Villas-Boas, Sofia B


    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

Economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination: if downstream cost differences exist, then discrimination shifts production inefficiently, toward high-cost retailers, so a ban increases welfare; if differences in price elasticity of demand across retailers exist, discrimination may increase welfare if quantity sold increases, so a ban reduces welfare. Using retail prices and quantities of coffee brands sold by German retailers, I estimate a model of demand and supply and separate cost and demand differences. Simulating a ban on wholesale price discrimination has positive welfare effects in this market, and less if downstream cost differences shrink, or with less competition. Copyright (c) 2009, RAND.

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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1017R3.

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Length: 38pages
Date of creation: Aug 2006
Date of revision: Oct 2008
Handle: RePEc:are:cudare:1017r3
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