Input Price Discrimination with Downstream Cournot Competitors
This Paper addresses the question of third-degree price discrimination in input markets. I propose a solution that relies on a method that decomposes the upstream monopolist’s profit into two parts, one that depends on average input prices, and one that depends on their distribution. I am able to obtain rather general results, and, in the linear demand case, I obtain a full characterization of the equilibria in the two regimes of price discrimination and price uniformity, generalizing the findings of Yoshida (2000). Under reasonable assumptions, input price discrimination negatively affects both consumer surplus and total welfare.
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|Date of creation:||Oct 2002|
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- Theodore C. Bergstrom & Hal R. Varian, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 715-718.
- 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.
- Ngo Van Long & Antoine Soubeyran, 1999.
"Cost Manipulation Games in Oligopoly, with Costs of Manipulating,"
CIRANO Working Papers
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- Katz, Michael L, 1987. "The Welfare Effects of Third-Degree Price Discrimination in," American Economic Review, American Economic Association, vol. 77(1), pages 154-67, March.
- Ngo Van Long & Antoine Soubeyran, 1999. "Input Price Discrimination, Access Pricing, and Bypass," CIRANO Working Papers 99s-23, CIRANO.
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- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, 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.
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