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Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination

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  • Aguirre Pérez, Iñaki

Abstract

In this paper, we show that in order for third-degree price discrimination to increase total output, the demands of the strong markets should be, as conjectured by Robinson (1933), more concave than the demands of the weak markets. By making the distinction between adjusted concavity of the inverse demand and adjusted concavity of the direct demand, we are able to state necessary conditions and sufficient conditions for third-degree price discrimination to increase total output.

Suggested Citation

  • 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.
  • Handle: RePEc:ehu:ikerla:6509
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    File URL: https://addi.ehu.es/handle/10810/6509
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    References listed on IDEAS

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    1. Simon GB Cowan & Simon Cowan, 2008. "When does third-degree price discrimination reduce social welfare, and when does it raise it?," Economics Series Working Papers 410, University of Oxford, Department of Economics.
    2. W. Leontief, 1940. "The Theory of Limited and Unlimited Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 54(3), pages 490-501.
    3. 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.
    4. John Vickers & Simon Cowan, 2007. "Output and Welfare Effects in the Classic Monopoly Price Discrimination Problem," Economics Series Working Papers 355, University of Oxford, Department of Economics.
    5. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    6. Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September.
    7. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
    8. 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.
    9. 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.
    10. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    11. 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.
    12. Shih, Jun-ji & Mai, Chao-cheng & Liu, Jung-chao, 1988. "A General Analysis of the Output Effect under Third-Degree Price Discrimination," Economic Journal, Royal Economic Society, vol. 98(389), pages 149-158, March.
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    Cited by:

    1. Aguirre, Iñaki, 2017. "Cournot Oligopoly, Price Discrimination and Total Output," MPRA Paper 80166, University Library of Munich, Germany.
    2. Simon Cowan, 2016. "Welfare-increasing third-degree price discrimination," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 326-340, May.
    3. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    4. Simon GB Cowan & Simon Cowan, 2008. "When does third-degree price discrimination reduce social welfare, and when does it raise it?," Economics Series Working Papers 410, University of Oxford, Department of Economics.

    More about this item

    Keywords

    third-degree price discrimination; output; monopoly; welfare;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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