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A Sufficient Statistics Approach for Welfare Analysis of Oligopolistic Third-Degree Price Discrimination

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  • Takanori ADACHI
  • Michal FABINGER

Abstract

This paper proposes a sufficient statistics approach to welfare analysis of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease aggregate output, social welfare, and con-sumer surplus simply entail a cross-market comparison of multiplications of two or three of the sufficient statistics—pass-through, conduct, and profit margin—that are functions of first-order and second-order elasticities of the firm’s demand. Notably, these results are derived under a general class of demand, and can be readily be extended to accom-modate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model.

Suggested Citation

  • Takanori ADACHI & Michal FABINGER, 2021. "A Sufficient Statistics Approach for Welfare Analysis of Oligopolistic Third-Degree Price Discrimination," Discussion papers e-21-005, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-21-005
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    More about this item

    Keywords

    Third-Degree Price Discrimination; Oligopoly; Sufficient Statistics.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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