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The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly

Author

Listed:
  • Takanori Adachi

    () (School of Economics, Nagoya University)

  • Noriaki Matsushima

    () (Institute of Social and Economic Research, Osaka University)

Abstract

This paper studies the welfare effects of third-degree price discrimination under oligopolistic competition with horizontal product differentiation. We derive a necessary and sufficient condition for price discrimination to improve social welfare: the degree of substitution must be sufficiently greater in the "strong" market (where the discriminatory price is higher than the uniform price) than in the "weak" market (where it is lower). It is verified, however, that consumer surplus is never improved; social welfare improves solely due to an increase in the firms' profits.

Suggested Citation

  • Takanori Adachi & Noriaki Matsushima, 2011. "The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly," KIER Working Papers 800, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:800
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Amarjyoti Mahanta, 2016. "Contemporaneous Most-Favoured-Customer Pricing Policy vs. Price Discrimination in a Differentiated Product Duopoly Market," Economics Bulletin, AccessEcon, vol. 36(1), pages 75-83.
    2. repec:bla:ecinqu:v:55:y:2017:i:1:p:339-351 is not listed on IDEAS
    3. Aguirre, Iñaki, 2017. "Cournot Oligopoly, Price Discrimination and Total Output," MPRA Paper 80166, University Library of Munich, Germany.
    4. Aguirre Iñaki, 2016. "On the Economics of the “Meeting Competition Defense” Under the Robinson–Patman Act," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1213-1238, September.
    5. Francisco Galera & Pedro Mendi & Juan Carlos Molero, 2017. "Quality Differences, Third-Degree Price Discrimination, And Welfare," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 339-351, January.

    More about this item

    Keywords

    Third-degree price discrimination; Oligopoly; Social welfare; Horizontal product differentiation; Substitutability; Complementarity;

    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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