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Price Discrimination in the Transport Industry and the Gains from Trade

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  • Zheng, Han

Abstract

Shipping companies often charges nonlinear and discriminatory pricing for transportation. This paper shows that this nonlinear and discriminatory pricing in the shipping industry could hamper the welfare gains from trade due to withinindustry allocation across heterogeneous firms. I extend a standard heterogeneous firm trade model with variable markups by incorporating monopolistically competitive shipping companies that charge nonlinear and discriminatory pricing against manufacturers. In a standard setting, shipping companies optimally charge a higher transport price to the more productive firms, weakening within-industry reallocation toward productive firms. Elimination of this discriminatory practice could potentially increase the gains from trade.

Suggested Citation

  • Zheng, Han, 2022. "Price Discrimination in the Transport Industry and the Gains from Trade," Discussion paper series HIAS-E-123, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:hias-e-123
    Note: October 12, 2022
    as

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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/74326/070_hiasDP-E-123.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Price discrimination; Shipping industry; Heterogeneous firms; The gains from trade;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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