Welfare-increasing third-degree price discrimination
The welfare and output effects of monopoly third-degree price discrimination are analyzed when inverse demand functions are parallel. Welfare is higher with discrimination than with a uniform price when demand functions are derived from the logistic distribution, and from a more general class of distributions. The sufficient condition in Varian (1985) for a welfare increase holds for these demand functions. Total output is higher with discrimination for a large set of demand functions including those derived from strictly log-concave distributions with increasing cost pass-through, such as the normal, logistic and extreme value, and standard log-convex demands.
|Date of creation:||22 Apr 2013|
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- Simon Cowan, 2012.
"Third-Degree Price Discrimination and Consumer Surplus,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 60(2), pages 333-345, 06.
- Simon GB Cowan & Simon Cowan, 2009. "Third-Degree Price Discrimination and Consumer Surplus," Economics Series Working Papers 462, University of Oxford, Department of Economics.
- Cowan, Simon & Vickers, John & Aguirre Pérez, Iñaki, 2009.
"Monopoly Price Discrimination and Demand Curvature,"
2009-39, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
- Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
- Xavier Gabaix & David Laibson & Deyuan Li & Hongyi Li & Sidney Resnick & Casper G. de Vries, 2013.
"The Impact of Competition on Prices with Numerous Firms,"
13-07, Chapman University, Economic Science Institute.
- Gabaix, Xavier & Laibson, David & Li, Deyuan & Li, Hongyi & Resnick, Sidney & de Vries, Casper G., 2016. "The impact of competition on prices with numerous firms," Journal of Economic Theory, Elsevier, vol. 165(C), pages 1-24.
- repec:ecj:econjl:v:122:y:2012:i::p:332-338 is not listed on IDEAS
- Hal R. Varian, 2012. "Revealed Preference and its Applications," Economic Journal, Royal Economic Society, vol. 122(560), pages 332-338, 05.
- Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
- Aguirre Pérez, Iñaki, 2009. "Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination," IKERLANAK 2009-38, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
- Simon GB Cowan & Simon Cowan, 2004. "The welfare effects of third-degree price discrimination," Economics Series Working Papers 205, University of Oxford, Department of Economics.
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