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Welfare and Output in Third-Degree Price Discrimination: a Note

Author

Listed:
  • Francisco Galera

    () (School of Economics and Business Administration, University of Navarra)

  • Jesús M. Zaratiegui

    () (School of Economics and Business Administration, University of Navarra)

Abstract

In this note I provide examples to show that, contrary to what is widely believed, when changing from an uniform price to a third-degree price discrimination situation, an improvement in welfare is possible with output reduction, if there is more than one firm.

Suggested Citation

  • Francisco Galera & Jesús M. Zaratiegui, 2003. "Welfare and Output in Third-Degree Price Discrimination: a Note," Faculty Working Papers 07/03, School of Economics and Business Administration, University of Navarra.
  • Handle: RePEc:una:unccee:wp0703
    as

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    File URL: http://www.unav.edu/documents/10174/6546776/1132242990_wp0703.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
    3. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
    4. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    5. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
    6. Takanori Adachi, 2005. "Third-Degree Price Discrimination, Consumption Externalities and Social Welfare," Economica, London School of Economics and Political Science, vol. 72(285), pages 171-178, February.
    7. Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-1262, December.
    8. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    9. Yoshihiro Yoshida, 2000. "Third-Degree Price Discrimination in Input Markets: Output and Welfare," American Economic Review, American Economic Association, vol. 90(1), pages 240-246, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Takanori Adachi & Noriaki Matsushima, 2014. "The Welfare Effects Of Third-Degree Price Discrimination In A Differentiated Oligopoly," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1231-1244, July.
    2. Ebenezer Tetteh, 2009. "Implementing differential pricing for essential medicines via country-specific bilateral negotiated discounts," Applied Health Economics and Health Policy, Springer, vol. 7(2), pages 71-89, June.
    3. repec:bla:ecinqu:v:55:y:2017:i:1:p:339-351 is not listed on IDEAS
    4. repec:kap:jeczfn:v:120:y:2017:i:3:d:10.1007_s00712-016-0508-2 is not listed on IDEAS
    5. repec:ebl:ecbull:v:17:y:2007:i:2:p:1-10 is not listed on IDEAS
    6. Braouezec, Yann, 2016. "On the welfare effects of regulating the number of discriminatory prices," Research in Economics, Elsevier, vol. 70(4), pages 588-607.
    7. Franciso Galera & Pedro Mendi & Juan Carlos Molero, 2015. "Quality differences, third-degree price discrimination, and welfare," Faculty Working Papers 03/15, School of Economics and Business Administration, University of Navarra.
    8. Bertoletti, Paolo, 2005. "Uniform pricing and social welfare," MPRA Paper 1082, University Library of Munich, Germany.
    9. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
    10. repec:ebl:ecbull:v:4:y:2006:i:32:p:1-4 is not listed on IDEAS
    11. Lin, Boqiang & Liu, Jianghua, 2011. "Principles, effects and problems of differential power pricing policy for energy intensive industries in China," Energy, Elsevier, vol. 36(1), pages 111-118.
    12. Pedro Barros & Xavier Martinez-Giralt, 2008. "On international cost-sharing of pharmaceutical R&D," International Journal of Health Economics and Management, Springer, vol. 8(4), pages 301-312, December.
    13. Takanori Adachi & Takeshi Ebina, 2016. "Log-linear demand systems with differentiated products are inconsistent with the representative consumer approach," Economics Bulletin, AccessEcon, vol. 36(1), pages 260-267.
    14. repec:ebl:ecbull:v:4:y:2006:i:23:p:1-6 is not listed on IDEAS
    15. Yeung-Nan Shieh, 2006. "Monopsonistic wage discrimination and employment effect under conditions of constant labor supply elasticity," Economics Bulletin, AccessEcon, vol. 4(32), pages 1-4.
    16. Edward Lopez & David Molina, 2010. "Third-Degree Price Discrimination: Apology Not Necessary," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 383-397, December.
    17. Shigeru Matsumoto & Hajime Sugeta, 2007. "Antitrust Policy and Environmental Protection," Economics Bulletin, AccessEcon, vol. 17(2), pages 1-10.
    18. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.

    More about this item

    Keywords

    price discrimination; imperfect competition; welfare;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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