Price Discrimination and the Cruise Line Industry: Implications for Market Definition, Competition, and Consumer Welfare

2008 ◽  
Vol 15 (1) ◽  
pp. 1-25 ◽  
Author(s):  
James Langenfeld ◽  
Wenqing Li
Keyword(s):  
Price Discrimination ◽  
Consumer Welfare ◽  
Market Definition ◽  
Cruise Line

scholarly journals Intertemporal Price Discrimination in Storable Goods Markets

2013 ◽  
Vol 103 (7) ◽  
pp. 2722-2751 ◽  
Author(s):  
Igal Hendel ◽  
Aviv Nevo
Keyword(s):  
Simple Model ◽  
Price Discrimination ◽  
Consumer Welfare ◽  
Optimal Pricing ◽  
Intertemporal Price Discrimination ◽  
Level Data ◽  
Future Consumption ◽  
The Impact ◽  
Total Welfare

We study intertemporal price discrimination when consumers can store for future consumption needs. We offer a simple model of demand dynamics, which we estimate using market-level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who stockpile for future consumption, and less price-sensitive consumers, who do not stockpile. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales (i) capture 25–30 percent of the gap between non-discriminatory profits and (unattainable) third-degree price discrimination profits, (ii) increase total welfare, and (iii) have a modest impact on consumer welfare. (JEL D11, D12, L11, L12, L81)

scholarly journals International Business Negotiation Strategies: Cases of Discrimination in Public Procurements

2019 ◽  
pp. 54-64
Author(s):  
Kęstutis Peleckis ◽  
Valentina Peleckienė ◽  
Kęstutis Peleckis ◽  
Edita Leonavičienė
Keyword(s):  
International Business ◽  
Price Discrimination ◽  
Negative Impact ◽  
Market Competition ◽  
Consumer Welfare ◽  
Theory And Practice ◽  
Negative Consequences ◽  
Negotiation Strategy ◽  
Negotiation Strategies ◽  
Different Levels

In the absence of competition, allowing monopolists to discriminate on prices, sales volumes may increase by adopting lower prices for certain groups of consumers who would not otherwise have purchased. If price discrimination is not perfect, it increases consumer welfare - that is, if the price does not correspond to the evaluation of each product by the consumer, then discrimination allows for additional consumers to buy the product at a price, which is lower than the one they would have liked to pay for it. This often results in negative consequences for both consumers and sellers. In this case opportunities for international business are opening, as intervention from other markets can provide additional alternatives to buyers by reducing the negative impact of distorted competition for the balance of negotiating power of negotiators. But there is another problem here in assessing the concentration of market participants, their impact on price discrimination. The aim of the article is to analyze the existing theory and practice of negotiation strategy in a complex way, at different levels of competition, to reveal possibilities to develop and implement these strategies, taking into account the problems of price discrimination. The object of the article is the preparation of negotiation strategies at different levels of competition, taking into account the problems of price discrimination. The article deals with the problem - there are not enough tools in the negotiation theory to help develop negotiation strategies with different levels of competition and price discrimination problems. The paper analyzes the mathematical model of oligopoly. This model explores the feasibility and effectiveness of negotiation strategy preparation in the face of distorted market competition.

1. Competition policy and economics

2018 ◽  
Author(s):  
Richard Whish ◽  
David Bailey
Keyword(s):  
Market Power ◽  
Market Share ◽  
Competition Policy ◽  
Competition Law ◽  
Consumer Welfare ◽  
Market Definition ◽  
Economic Context ◽  
Competition Laws ◽  
Competition Process

This chapter provides an overview of competition law and its economic context. Section 2 describes the practices that competition laws attempt to control in order to protect the competition process. Section 3 examines the theory of competition and gives an introductory account of why the effective enforcement of competition law is thought to be beneficial for consumer welfare. Section 4 considers the expected functions of a system of competition law. Section 5 then introduces two key economic concepts, market definition and market power, that are important to a better understanding of competition policy. The chapter concludes with a table of market share figures that are significant in the application of EU and UK competition law.

scholarly journals Banning Price Discrimination under Imperfect Competition: Evidence from Colombia's Broadband

2020 ◽  
Author(s):  
Juan Sebastián Vélez-Velásquez
Keyword(s):  
Economic Theory ◽  
Price Discrimination ◽  
Low Income ◽  
Imperfect Competition ◽  
Consumer Surplus ◽  
Consumer Welfare ◽  
Market Segments ◽  
Uniform Price ◽  
Uniform Pricing ◽  
Price Discriminate

Economic theory is inconclusive regarding the effects of banning third-degree price discrimination under imperfect competition because they depend on how the competing firms rank their market segments. When, relative to uniform pricing, all competitors want higher prices in the same market segments, a ban on price discrimination will reduce profits and benefit some consumers at the expense of others. If, instead, some firms want to charge higher prices in segments where their competitors want to charge lower prices, price discrimination increases competition driving all prices down. In this case, forcing the firms to charge uniform prices can increase their profits and reduce consumer surplus. We use data on Colombian broadband subscriptions to estimate the demand for internet services. Estimated preferences and assumptions about competition are used to simulate a scenario in which firms lose their ability to price discriminate. Our results show large effects on consumer surplus and large effects on firms’ profits. Aggregate profits increase but the effects for individual firms are heterogeneous. The effects on consumer welfare vary by city. In most cities, a uniform price regime causes large welfare transfers from low-income households towards high-income households and in a few cities, prices in all segments rise. Poorer households respond to the increase in prices by subscribing to internet plans with slower download speed.

Quantitative Price Tests in Antitrust Market Definition with an Application to the Savory Snacks Markets

2014 ◽  
Vol 12 (1) ◽  
pp. 1-33 ◽  
Author(s):  
Yannis Katsoulacos ◽  
Ioanna Konstantakopoulou ◽  
Eleni Metsiou ◽  
Efthymios Tsionas
Keyword(s):  
Market Structure ◽  
Consumer Welfare ◽  
Market Definition ◽  
Relevant Market ◽  
Monthly Data ◽  
Complete Set ◽  
Definition Of

AbstractIn this paper, we utilize the complete set of quantitative tests at the disposal of economists for delineating antitrust markets. This includes the Small but Significant Increase in Price (SSNIP) test but also a large number of traditional and newer price co-movement tests. We apply these tests to the savory snacks market using Greek bi-monthly data. This market has been subject to many antitrust investigations because of its market structure and its important implications for consumer welfare. However, no dominant view has yet emerged regarding the appropriate definition of the relevant market. Our results indicate that a wide relevant market definition is appropriate.

scholarly journals Price Discrimination with Varying Qualities of Information

2016 ◽  
Vol 16 (2) ◽  
pp. 1093-1121 ◽  
Author(s):  
Qihong Liu ◽  
Jie Shuai
Keyword(s):  
Price Discrimination ◽  
Information Acquisition ◽  
Information Quality ◽  
Consumer Surplus ◽  
Spatial Differentiation ◽  
Consumer Welfare ◽  
Consumer Information ◽  
Demand Elasticity ◽  
Social Surplus ◽  
Potential Damage

Abstract Advances in information technology have greatly enhanced firms’ ability to collect, market and utilize consumer information. As the market for consumer information expands rapidly, businesses are armed with unprecedented means to target any group of consumers they desire. This has important and far-reaching impacts on consumer welfare. In this paper we analyze the welfare impacts of price discrimination facilitated by increasing qualities of consumer information. We employ a two-dimensional spatial differentiation model where consumer information is available on one dimension, and better information leads to more refined price discrimination. We find that as information quality improves, equilibrium prices and profits monotonically increase while consumer surplus and social surplus monotonically decrease. Price discrimination has a reduced demand elasticity effect which becomes stronger when consumer information becomes more precise. Our results suggest that regulators need to pay more attention to the potential damage to consumer welfare by the increasing collection and utilization of consumer information. We also endogenize firms’ information acquisition decisions.

Challenges of market definition and price discrimination in preparing strategy of negotiations

2022 ◽  
Vol 14 (3) ◽  
pp. 1
Author(s):  
Edita Leonavičienė ◽  
K�™stutis Peleckis ◽  
Valentina Peleckiene ◽  
Kestutis Peleckis
Keyword(s):  
Price Discrimination ◽  
Market Definition

scholarly journals Can Price Discrimination be Bad for Firms and Good for All Consumers? A Theoretical Analysis of Cross-Market Price Constraints with Entry and Product Differentiation

2003 ◽  
Vol 3 (1) ◽  
Author(s):  
Ofer H Azar
Keyword(s):  
Product Differentiation ◽  
Price Discrimination ◽  
Market Price ◽  
Consumer Welfare ◽  
Natural Monopoly ◽  
Universal Service ◽  
Differentiated Products ◽  
Duopoly Model ◽  
Price Discriminate ◽  
Price Constraints

Abstract The article examines a differentiated-products duopoly model where the firms make entry decisions to two markets and then choose prices. The effects of product differentiation and entry costs are analyzed in two games: with and without price discrimination between the markets. Allowing price discrimination encourages more entry and tends to reduce prices and profits and to increase consumer welfare in both markets. The model suggests that firms might be better off if they agree not to price discriminate between different markets. It also suggests that when the market is not a natural monopoly, regulators should consider the effects of universal service requirements on entry before adopting them, because entry might be discouraged by such requirements, leading to less competitive markets.

An old friend is better than two new ones? Approaches to market research in the context of digital transformation for the antitrust laws enforcement

2020 ◽  
pp. 37-55 ◽  
Author(s):  
A. E. Shastitko ◽  
O. A. Markova
Keyword(s):  
Business Models ◽  
Rapid Development ◽  
Digital Transformation ◽  
Market Definition ◽  
Type I ◽  
Type Ii ◽  
Digital Platforms ◽  
Advantages And Disadvantages ◽  
Pass Through ◽  
Type Ii Errors

Digital transformation has led to changes in business models of traditional players in the existing markets. What is more, new entrants and new markets appeared, in particular platforms and multisided markets. The emergence and rapid development of platforms are caused primarily by the existence of so called indirect network externalities. Regarding to this, a question arises of whether the existing instruments of competition law enforcement and market analysis are still relevant when analyzing markets with digital platforms? This paper aims at discussing advantages and disadvantages of using various tools to define markets with platforms. In particular, we define the features of the SSNIP test when being applyed to markets with platforms. Furthermore, we analyze adjustment in tests for platform market definition in terms of possible type I and type II errors. All in all, it turns out that to reduce the likelihood of type I and type II errors while applying market definition technique to markets with platforms one should consider the type of platform analyzed: transaction platforms without pass-through and non-transaction matching platforms should be tackled as players in a multisided market, whereas non-transaction platforms should be analyzed as players in several interrelated markets. However, if the platform is allowed to adjust prices, there emerges additional challenge that the regulator and companies may manipulate the results of SSNIP test by applying different models of competition.

The Micro and Macro of Managerial Beliefs

2020 ◽  
Author(s):  
Jose Maria Barrero
Keyword(s):  
Rational Expectations ◽  
Asset Price ◽  
Heterogeneous Firms ◽  
Adjustment Costs ◽  
Consumer Welfare ◽  
Sales Growth ◽  
Firm Level ◽  
Managerial Decisions ◽  
Managerial Beliefs ◽  
Growth Volatility

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are overprecise (overconfident): they underestimate future sales growth volatility. (3) Managers overextrapolate: their forecasts are too optimistic after positive shocks and too pessimistic after negative shocks. To quantify the implications of these facts, I estimate a dynamic general equilibrium model in which managers of heterogeneous firms use a subjective beliefs process to make forward-looking hiring decisions. Overprecision and overextrapolation lead managers to overreact to firm-level shocks and overspend on adjustment costs, destroying 2.1 percent of the typical firm’s value. Pervasive overreaction leads to excess volatility and reallocation, lowering consumer welfare by 0.5 to 2.3 percent relative to the rational expectations equilibrium. These findings suggest overreaction may amplify asset-price and business cycle fluctuations.

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