The Welfare Effects of Regulating the Number of Market Segments
We consider a model in which a profit-maximizing organization called the monopolist faces N _ 2 different (micro) market segments while the number k of market segments is chosen the regulator, where k is an integer between 1 and N. Unless k = 1 or k = N, the monopolist's profit maximization is a mixed-integer programming problem, the solution of which is called the optimal profit policy. When demands are linear, we show that it is always worthwhile to regulate the number of market segments since the value of k that maximizes the social welfare under the optimal profit policy is never greater than a critical threshold _k. This result allows us to disentangle the good aspect of price discrimination, the so-called output effect, from the bad one, that we call the pure profit effect. Further results are provided for the specific case of parallel demands. Non-linear demands are also briefly considered.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ieseg.fr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmalensee, Richard., 1980.
"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March.
- Pascal Belan & Stéphane Gauthier & Guy Laroque, 2008.
"Optimal grouping of commodities for indirect taxation,"
- Belan, Pascal & Gauthier, Stéphane & Laroque, Guy, 2008. "Optimal grouping of commodities for indirect taxation," Journal of Public Economics, Elsevier, vol. 92(7), pages 1738-1750, July.
- Le Breton, M. & Weber, S., 1995.
"Stability of Coalition Structures and the Principle of Optimal Partitioning,"
95a06, Universite Aix-Marseille III.
- Breton, M. le & Weber, S., 1992. "Stability of Coalition Structures and the Principle of Optimal Partitioning," Papers 93-6, York (Canada) - Department of Economics.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Le Grand, Julian, 1975. "Public Price Discrimination and Aid to Low Income Groups," Economica, London School of Economics and Political Science, vol. 42(165), pages 32-42, February.
- Steinberg, Richard & Weisbrod, Burton A., 2005. "Nonprofits with distributional objectives: price discrimination and corner solutions," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2205-2230, December.
- Yong He & Guang-Zhen Sun, 2006. "Income Dispersion And Price Discrimination," Pacific Economic Review, Wiley Blackwell, vol. 11(1), pages 59-74, 02.
- I�aki Aguirre & Simon Cowan & John Vickers, 2010.
"Monopoly Price Discrimination and Demand Curvature,"
American Economic Review,
American Economic Association, vol. 100(4), pages 1601-15, September.
- Cowan, Simon & Vickers, John & Aguirre Pérez, Iñaki, 2009. "Monopoly Price Discrimination and Demand Curvature," IKERLANAK 2009-39, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
- Mark Armstrong & John Vickers, 1991. "Welfare Effects of Price Discrimination by a Regulated Monopolist," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 571-581, Winter.
- Phlips, Louis, 1988. " Price Discrimination: A Survey of the Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 2(2), pages 135-67.
- Malueg, David A. & Schwartz, Marius, 1994.
"Parallel imports, demand dispersion, and international price discrimination,"
Journal of International Economics,
Elsevier, vol. 37(3-4), pages 167-195, November.
- Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
- John Hartwick, 1976.
"Optimal Price Discrimination,"
237, Queen's University, Department of Economics.
- Braouezec, Yann, 2012. "Customer-class pricing, parallel trade and the optimal number of market segments," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 605-614.
- Victor Kaftal & Debashis Pal, 2008. "Third Degree Price Discrimination in Linear-Demand Markets: Effects on Number of Markets Served and Social Welfare," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 558-573, October.
When requesting a correction, please mention this item's handle: RePEc:ies:wpaper:e201311. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Monika Marin)
If references are entirely missing, you can add them using this form.