Third-degree Price Discrimination Versus Uniform Pricing PDF Download

Author: Dirk Bergemann
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Manuel Salas-Velasco
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This paper uses both a geometrical and mathematical analysis to explain monopolistic third-degree price discrimination, and it also shows how price discrimination affects society. A frequent policy question in the price discrimination literature is whether to allow third-degree price discrimination or to enforce uniform pricing. A key feature to understanding this issue in the context of imperfectly competitive markets is the impact of price discrimination on output. The article shows that a monopoly facing downward sloping linear demands, and constant marginal costs, will obtain higher profits under price discrimination than under a single-price strategy, but price discrimination lowers welfare if total output does not change. When price discrimination causes total output to increase, then this practice will have a beneficial effect on overall welfare.

Author: Edward J. Lopez
Publisher:
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Category :
Languages : en
Pages : 0

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Applied work in price discrimination often treats demand curves among multiple market segments as algebraically additive. Yet the welfare effects of multi-market (third degree) price discrimination depend on the method by which demand segments are added. Treating demands as geometrically additive yields the well known result that discrimination absent an increase in production diminishes Marshallian surplus. But if demands are treated as algebraically additive then discrimination increases welfare relative to uniform pricing. Quantity is identical in the three cases, so the effect is not due to market opening. Nor is the effect due to scale economies since marginal cost is assumed constant. Profit is always greater under discrimination, so the effect is due to distributional changes in consumer surplus. The model is restricted to linear demands and constant marginal cost but can be generalized for future work and policy analysis.

Author: Alexandre de Cornière
Publisher:
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Languages : en
Pages : 0

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We investigate the welfare effects of third-degree price discrimination by a two-sided platform that enables interaction between buyers and sellers. Sellers are heterogenous with respect to their per-interaction benefit, and, under price discrimination, the platform can condition its fee on sellers' type. In a model with linear demand on each side, we show that price discrimination: (i) increases participation on both sides; (ii) enhances total welfare; (iii) may result in a strict Pareto improvement, with both seller types being better-off than under uniform pricing. These results, which are in stark contrast to the traditional analysis of price discrimination, are driven by the existence of cross-group network effects. By improving the firm's ability to monetize seller participation, price discrimination induces the platform to attract more buyers, which then increases seller participation. The Pareto improvement result means that even those sellers who pay a higher price under discrimination can be better-off, due to the increased buyer participation.

Author: George Norman
Publisher: Edward Elgar Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 624

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This volume brings together significant articles which have appeared between 1971 and 1997, analyzing the application and effects of price discrimination.

Author: Charles Adams
Publisher:
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Category :
Languages : en
Pages : 7

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The paper points up limitations in the standard undergraduate treatment of third-degree price discrimination by monopolists. While such treatments allude to qualitative distinctions between higher and lower priced alternatives, failure to capture those distinctions in underlying cost and demand structures can result in only partial and possibly misleading conclusions about the nature and consequences of price discrimination. Building on earlier work in the derivation of quality-differentiated demand (see SSRN 'https://ssrn.com/abstract=2576773' https://ssrn.com/abstract=2576773 and 'https://ssrn.com/abstract=3107103' https://ssrn.com/abstract=3107103), the paper compares the standard analysis of price discrimination with one that explicitly accounts for monopoly power in manipulating quality choices. The example provided illustrates the potential for substantially greater profits and greater efficiency losses by forcing some groups of consumers into suboptimal quality choices once quality variations are explicitly accounted for.

Author:
Publisher: SIAM
ISBN: 9780898715385
Category : Mathematics
Languages : en
Pages : 896

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From the January 2003 symposium come just over 100 papers addressing a range of topics related to discrete algorithms. Examples of topics covered include packing Steiner trees, counting inversions in lists, directed scale-free graphs, quantum property testing, and improved results for directed multicut. The papers were not formally refereed, but attempts were made to verify major results. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com)

Author: Richard Schmalensee
Publisher: North Holland
ISBN:
Category : Business & Economics
Languages : en
Pages : 1002

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Determinants of firm and market organization; Analysis of market behavior; Empirical methods and results; International issues and comparision; government intervention in the Marketplace.

Author: Louis Phlips
Publisher: Cambridge University Press
ISBN: 9780521283946
Category : Business & Economics
Languages : en
Pages : 304

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A theoretical and unified explanation of how prices are determined in practice, written in a non-technical way.

Author: David A. Malueg
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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We derive bounds on the ratio of a monopolist's profit from third-degree price discrimination to that from uniform pricing. If a monopolist serves N independent markets, demand is continuous, and the cost function is superadditive, then the profit ratio is bounded by N. This bound is tight unless under price discrimination some markets are sold no output or are charged equal prices. The profit ratio can be bounded under more general conditions if the monopolist can ration demand under uniform pricing. We provide examples showing the profit ratio cannot generally be bounded when marginal cost is decreasing, fixed cost is positive, or demand is discontinuous. We extend the analysis to situations in which the monopolist sells several products or sells to distinct markets for which there are heterogeneous transportation costs.