Market Separation, Negative Consumption Externalities and Capacity Constraints
Companies that offer services with capacity constraints in which there are negative consumption externalities (such as restaurants that serve smokers and non-smokers, airlines that fyy passengers travelling with infants and without infants or organizers of sport events that serve aggressive and friendly supporters) tend to separate generators of the externality from receptors of the externality. Do consumers and/or Society end better off with this type of separation? We show that if firms have complete information then: unless the number of consumers is small enough, as a net effect, consumers end worse off with separation than without it. Instead, when investment in separation is negligible, firms always prefer separation. This is true regardless whether firms price discriminate consumers. On the other side, if firms have incomplete information then: consumers prefer no separation if their number is small enough and firms always prefer no-separation -also when investment in separation is negligible. First we derive the results in the context of a monopoly that serves a linear demand, later we address robustness and discuss policy implications.
|Date of creation:||2013|
|Contact details of provider:|| Postal: Avda. Vicuña Mackenna 4860, Macul, Santiago|
Phone: (562) 354-4303
Fax: (562) 553-1664
Web page: http://www.economia.uc.cl
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.:
- Adachi, Takanori, 2002. "A Note on 'Third-Degree Price Discrimination with Interdependent Demands.'," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 235-235, June.
- Jeffery Borland, 2003. "Demand for Sport," Oxford Review of Economic Policy, Oxford University Press, vol. 19(4), pages 478-502, Winter.
- Jean-Charles Rochet & Jean Tirole, 2014.
"Platform Competition in Two-Sided Markets,"
Competition Policy International, vol. 10.
- Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform competition in two sided markets," LSE Research Online Documents on Economics 24929, London School of Economics and Political Science, LSE Library.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:448. 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: (Jaime Casassus)
If references are entirely missing, you can add them using this form.