Third Degree Price Discrimination in Linear‐Demand Markets: Effects on Number of Markets Served and Social Welfare

2008 ◽  
Vol 75 (2) ◽  
pp. 558-573
Author(s):  
Victor Kaftal ◽  
Debashis Pal
Keyword(s):  
Social Welfare ◽  
Price Discrimination ◽  
Linear Demand

Analysis on Third-Degree Price Discrimination in Oligopoly Market Based on Static Game Theory

2014 ◽  
Vol 912-914 ◽  
pp. 1865-1873
Author(s):  
Xing You Gao
Keyword(s):  
Price Discrimination ◽  
Weighted Average ◽  
Complete Information ◽  
Equilibrium Price ◽  
Total Revenue ◽  
Static Game ◽  
Demand Functions ◽  
Equilibrium Prices ◽  
Linear Demand ◽  
The Relationship

Equilibrium production, equilibrium price and equilibrium total revenue in the case of implementing third-degree price discrimination and unified pricing were analyzed under the condition of two oligopoly firms with 2 sub markets by complete information static game method, and the relationship between the three indexes of the two cases were studied. The results showed that, under the condition of linear demand functions of the two sub markets, the equilibrium output of unified pricing was equal to the equilibrium output of discriminative pricing; the equilibrium price of unified pricing was weighted average of the equilibrium prices of two sub markets while discriminative pricing; the equilibrium total revenue of unified pricing was less than the equilibrium total revenue of discriminative pricing.

scholarly journals Monopoly Price Discrimination and Demand Curvature

2010 ◽  
Vol 100 (4) ◽  
pp. 1601-1615 ◽  
Author(s):  
Iñaki Aguirre ◽  
Simon Cowan ◽  
John Vickers
Keyword(s):  
Social Welfare ◽  
Price Discrimination ◽  
Sufficient Conditions ◽  
General Analysis ◽  
Demand Functions ◽  
Positive Effects ◽  
Monopoly Price ◽  
Inverse Demand

This paper presents a general analysis of the effects of monopolistic third-degree price discrimination on welfare and output when all markets are served. Sufficient conditions—involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the different markets—are presented for discrimination to have negative or positive effects on social welfare and output. (JEL D42)

scholarly journals On the Economics of the “Meeting Competition Defense” Under the Robinson–Patman Act

2016 ◽  
Vol 16 (3) ◽  
pp. 1213-1238 ◽  
Author(s):  
Iñaki Aguirre
Keyword(s):  
Social Welfare ◽  
Price Discrimination ◽  
Welfare Effects ◽  
Competitive Pressure ◽  
Economic Aspects ◽  
Equilibrium Models ◽  
Final Good ◽  
Good Market ◽  
Goods Market ◽  
Secondary Line

Abstract This paper studies the welfare effects of third-degree price discrimination when competitive pressure varies across markets. In particular, we study the economic aspects of the Robinson–Patman Act associated with the “meeting competition defense.” Using equilibrium models, the main result we find is that this defense might be used successfully in cases of primary line injury precisely when it should not be used, namely when price discrimination reduces social welfare. This result obtains both when discrimination appears in the final good market and when it is used in the intermediate goods market. We also find that these results may maintain under secondary line injury.

Notes on Aggregation Criteria in Market Segmentation

1984 ◽  
Vol 21 (3) ◽  
pp. 332-335
Author(s):  
William Blozan ◽  
Paul Prabhaker
Keyword(s):  
Market Segmentation ◽  
Price Discrimination ◽  
Extreme Conditions ◽  
Clustering Techniques ◽  
Demand Functions ◽  
Marginal Costs ◽  
Linear Demand ◽  
Profit Maximizing ◽  
Theoretical Evidence

First, the authors seek to dispel any misunderstanding that standard price discrimination theory prescribes a profit-maximizing aggregation criterion. They argue that Tollefson and Lessig misinterpreted this theory, but prove that the latter authors’ unwarranted implication is justified in the case of linear demand functions and constant marginal costs. Second, the authors argue that the “theoretical evidence” presented by Tollefson and Lessig against using elasticities to cluster segments is, in fact, no evidence at all, and that their simulations may be valid only under extreme conditions. Finally, a new theorem is offered which provides some support for using clustering techniques to disaggregate markets.

scholarly journals Competitive Personalized Pricing

2020 ◽  
Vol 66 (9) ◽  
pp. 4003-4023 ◽  
Author(s):  
Zhijun Chen ◽  
Chongwoo Choe ◽  
Noriaki Matsushima
Keyword(s):  
Social Welfare ◽  
Price Discrimination ◽  
Identity Management ◽  
Consumer Surplus ◽  
Consumer Information ◽  
Deadweight Loss ◽  
Market Segment ◽  
Target Segment ◽  
Price Discriminate

We study a model where each competing firm has a target segment where it has full consumer information and can exercise personalized pricing, and consumers may engage in identity management to bypass the firm’s attempt to price discriminate. In the absence of identity management, more consumer information intensifies competition because firms can effectively defend their turf through targeted personalized offers, thereby setting low public prices offered to nontargeted consumers. But the effect is mitigated when consumers are active in identity management because it raises the firm’s cost of serving nontargeted consumers. When firms have sufficiently large and nonoverlapping target segments, identity management can enable firms to extract full surplus from their targeted consumers through perfect price discrimination. Identity management can also induce firms not to serve consumers who are not targeted by either firm when the commonly nontargeted market segment is small. This results in a deadweight loss. Thus, identity management by consumers can benefit firms and lead to lower consumer surplus and lower social welfare. Our main insight continues to be valid when a fraction of consumers are active in identity management or when there is a cost of identity management. We also discuss the regulatory implications for the use of consumer information by firms as well as the implications for management. This paper was accepted by Juanjuan Zhang, marketing.

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