IDEAS home Printed from https://ideas.repec.org/p/ehu/ikerla/6235.html

Welfare Effects of Third-Degree Price Discrimination: Ippolito Meets Schmalensee and Varian

Author

Listed:
  • Aguirre Pérez, Iñaki

Abstract

Based on a pioneering work by Ippolito (1980) we construct a simple model wich allows the welfare effects of third-degree price discrimination to be well understood and explained. The decomposition of the change in welfare into a misallocation effect and an output effect has advantages over the well-established analysis by Schamalensee (1981) and Varian (1985). In particular, our approach provides a graphic analysis which clarifies the welfare analysis of third-degree price discrimination.

Suggested Citation

  • Aguirre Pérez, Iñaki, 2011. "Welfare Effects of Third-Degree Price Discrimination: Ippolito Meets Schmalensee and Varian," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    • Handle: RePEc:ehu:ikerla:6235
    as

    Download full text from publisher

    File URL: https://addi.ehu.eus/handle/10810/6235
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. David K. Round & Ron P. Mclver, 2006. "Teaching Third-Degree Price Discrimination," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(2), pages 236-243, April.
    3. 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.
    4. Formby, John P & Layson, Stephen K & Smith, W James, 1983. "Price Discrimination, 'Adjusted Concavity,' and Output Changes under Conditions of Constant Elasticity," Economic Journal, Royal Economic Society, vol. 93(372), pages 892-899, December.
    5. 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.
    6. Greenhut, M L & Ohta, H, 1976. "Joan Robinson's Criterion for Deciding Whether Market Discriminntion Reduces Output," Economic Journal, Royal Economic Society, vol. 86(341), pages 96-97, March.
    7. Paolo Bertoletti, 2009. "On the output criterion for price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 2951-2956.
    8. Leeson, Peter T. & Sobel, Russell S., 2008. "Costly price discrimination," Economics Letters, Elsevier, vol. 99(1), pages 206-208, April.
    9. Liu Qihong & Serfes Konstantinos, 2011. "Third-Degree Price Discrimination," Journal of Industrial Organization Education, De Gruyter, vol. 5(1), pages 1-23, March.
    10. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    11. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
    12. 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.
    13. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oksana Loginova & Andrea Mantovani, 2019. "Price competition in the presence of a web aggregator," Journal of Economics, Springer, vol. 126(1), pages 43-73, January.
    2. O. Loginova & A. Mantovani, 2015. "Information and Online Reviews," Working Papers wp996, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    4. Amedeo Piolatto, 2015. "Online booking and information: competition and welfare consequences of review aggregators," Working Papers 2015/11, Institut d'Economia de Barcelona (IEB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aguirre Pérez, Iñaki, 2011. "Welfare Effects of Third-Degree Price Discrimination: Ippolito Meets Schmalensee and Varian," IKERLANAK 2011-54, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. repec:ehu:ikerla:11103 is not listed on IDEAS
    3. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    4. 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.
    5. repec:ehu:ikerla:6547 is not listed on IDEAS
    6. repec:ehu:ikerla:14747 is not listed on IDEAS
    7. Einer Elhauge & Barry Nalebuff, 2017. "The Welfare Effects of Metering Ties," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 33(1), pages 68-104.
    8. Paolo Bertoletti, 2009. "On the output criterion for price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 2951-2956.
    9. Simon Cowan, 2016. "Welfare-increasing third-degree price discrimination," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 326-340, May.
    10. Zhu Wang & Julian Wright, 2018. "Should platforms be allowed to charge ad valorem fees?," Journal of Industrial Economics, Wiley Blackwell, vol. 66(3), pages 739-760, September.
    11. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    12. 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.
    13. Adachi, Takanori, 2023. "A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    14. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    15. Morten Hviid & Greg Shaffer, 2012. "Optimal low-price guarantees with anchoring," Quantitative Marketing and Economics (QME), Springer, vol. 10(4), pages 393-417, December.
    16. Youping Li, 2017. "Differential Pricing in Intermediate Good Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 585-596, September.
    17. Yang, Chin W. & Peng, Hsiao P. & Li, Jian F., 1996. "The optimum uniform and discriminatory taxes or tariffs of third-degree price discrimination," International Review of Economics & Finance, Elsevier, vol. 5(1), pages 77-84.
    18. Tremblay, Mark J., 2019. "Pareto price discrimination," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    19. Li, Youping, 2013. "Timing of investments and third degree price discrimination in intermediate good markets," Economics Letters, Elsevier, vol. 121(2), pages 316-320.
    20. repec:ebl:ecbull:v:4:y:2008:i:11:p:1-11 is not listed on IDEAS
    21. Aguirre Pérez, Iñaki, 2009. "Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination," IKERLANAK 2009-38, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    22. repec:ehu:ikerla:6509 is not listed on IDEAS
    23. Li, Youping & Zhang, Jianhu, 2024. "The welfare effects of input price discrimination revisited," International Journal of Industrial Organization, Elsevier, vol. 95(C).
    24. 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, July.
    25. Jong-Hee Hahn & Chan KIm, 2018. "Input price discrimination with differentiated final products," Working papers 2018rwp-118, Yonsei University, Yonsei Economics Research Institute.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehu:ikerla:6235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alcira Macías Redondo (email available below). General contact details of provider: https://edirc.repec.org/data/f1ehues.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.