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On the economics of the "meeting competition defense" under the Robinson-Patman Act

Listed author(s):
  • Aguirre Pérez, Iñaki

In this paper we analyze the welfare effects of third-degree price discrimination when competitive pressure varies across markets. In particular, we study the economic aspects of the Robinson-Patman Act associated with the “meeting competition defense.” Using equilibrium models, the main result we find is that this defense might be used successfully in cases of primary line injury precisely when it should not be used, namely when price discrimination reduces social welfare. This result obtains both when discrimination appears in the final good market and when it is used in the intermediate goods market. We also find that these results may drastically change under secondary line injury.

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File URL: https://addi.ehu.es/handle/10810/14747
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Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number Ikerlanak;2015-86.

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Date of creation: 19 Feb 2015
Handle: RePEc:ehu:ikerla:14747
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Order Information: Postal: Dpto. de Fundamentos del Análisis Económico I, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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  1. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
  2. Neven, Damien J & Phlips, Louis, 1985. "Discriminating Oligopolists and Common Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 133-149, December.
  3. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-359, December.
  4. Krishnendu Ghosh Dastidar, 2006. "On Third-Degree Price Discrimination In Oligopoly," Manchester School, University of Manchester, vol. 74(2), pages 231-249, 03.
  5. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
  6. Roman Inderst & Tommaso Valletti, 2009. "Price discrimination in input markets," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 1-19.
  7. Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-1262, December.
  8. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-250, March.
  9. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
  10. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
  11. O'Brien, Daniel P & Shaffer, Greg, 1994. "The Welfare Effects of Forbidding Discriminatory Discounts: A Secondary Line Analysis of Robinson-Patman," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 296-318, October.
  12. Ryan Luchs & Tansev Geylani & Anthony Dukes & Kannan Srinivasan, 2010. "The End of the Robinson-Patman Act? Evidence from Legal Case Data," Management Science, INFORMS, vol. 56(12), pages 2123-2133, December.
  13. Simon Cowan, 2007. "The welfare effects of third-degree price discrimination with nonlinear demand functions," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 419-428, June.
  14. Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
  15. Yongmin Chen & Marius Schwartz, 2015. "Differential pricing when costs differ: a welfare analysis," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 442-460, June.
  16. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-247, March.
  17. Takanori Adachi & Noriaki Matsushima, 2014. "The Welfare Effects Of Third-Degree Price Discrimination In A Differentiated Oligopoly," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1231-1244, 07.
  18. Cheung, Francis K. & Wang, X. Henry, 1999. "A note on the effect of price discrimination on entry: Research note," Journal of Economics and Business, Elsevier, vol. 51(1), pages 67-72, January.
  19. 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.
  20. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
  21. Nahata, Babu & Ostaszewski, Krzysztof & Sahoo, P K, 1990. "Direction of Price Changes in Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 80(5), pages 1254-1258, December.
  22. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  23. Katz, Michael L, 1987. "The Welfare Effects of Third-Degree Price Discrimination in," American Economic Review, American Economic Association, vol. 77(1), pages 154-167, March.
  24. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2013. "Does Banning Price Discrimination Promote Entry And Increase Welfare? A Model Of Differentiated-Product Duopoly With Asymmetric Markets," Manchester School, University of Manchester, vol. 81(4), pages 660-681, 07.
  25. Cheung, Francis K & Wang, Xinghe, 1997. "The Output Effect under Oligopolistic Third Degree Price Discrimination," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 23-30, June.
  26. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
  27. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
  28. Aguirre, Inaki, 2000. "The Most-Favoured-Customer Pricing Policy and Competitive Advantage," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 215-223, July.
  29. DeGraba, Patrick, 1990. "Input Market Price Discrimination and the Choice of Technology," American Economic Review, American Economic Association, vol. 80(5), pages 1246-1253, December.
  30. Paul W. Dobson & Michael Waterson, 2005. "Chain-Store Pricing Across Local Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 93-119, 03.
  31. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
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