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Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare

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  • Hinnerk Gnutzmann

    (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

Abstract

Price discrimination by consumer's purchase history is widely used in regulated industries, such as communication or utilities, both by incumbents and entrants. I show that such discrimination can have surprisingly negative welfare e ects { even though prices and industry pro ts fall, so does consumer surplus. Earlier studies that did not allow entrants to discriminate or assumed symmetric rms yielded sharply di erent results, the pro{competitive e ect of price discrimination are stronger in these settings. Imposing a pricing constraint on incumbent's discrimination leads the entrant to discriminate more heavily, but still improves both consumer and producer welfare.

Suggested Citation

  • Hinnerk Gnutzmann, 2014. "Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare," DISCE - Working Papers del Dipartimento di Economia e Finanza def019, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie1:def019
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    References listed on IDEAS

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    More about this item

    Keywords

    History{based price discrimination; asymmetric price discrimination; switching cost;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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