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Monopolistic third-degree price discrimination under vertical product differentiation

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  • Nguyen, Xuan

Abstract

This paper shows in a vertical product differentiation model with variable costs of quality that monopolistic third-degree price discrimination always reduces welfare regardless of whether the quality is fixed or is endogenous. The results provide rich implications for antitrust policy.

Suggested Citation

  • Nguyen, Xuan, 2014. "Monopolistic third-degree price discrimination under vertical product differentiation," Economics Letters, Elsevier, vol. 125(2), pages 153-155.
    • Handle: RePEc:eee:ecolet:v:125:y:2014:i:2:p:153-155
    DOI: 10.1016/j.econlet.2014.08.035
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    References listed on IDEAS

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    1. 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.
    2. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    3. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    4. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-247, March.
    5. 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.
    6. Ikeda, Takeshi & Toshimitsu, Tsuyoshi, 2010. "Third-degree price discrimination, quality choice, and welfare," Economics Letters, Elsevier, vol. 106(1), pages 54-56, January.
    7. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Masahiko Hattori & Yasuhito Tanaka, 2017. "License or Entry in Duopoly with Quality Improving Innovation: Alternative Definitions of License Fee," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 13(1), pages 1-26, February.
    2. Francisco Galera & Pedro Mendi & Juan Carlos Molero, 2017. "Quality Differences, Third-Degree Price Discrimination, And Welfare," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 339-351, January.
    3. Matteucci Giorgio & Reverberi Pierfrancesco, 2018. "Uniform Pricing and Product Innovation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-6, January.
    4. Hong, Xianpei & Zhou, Menghuan & Gong, Yeming, 2021. "Dilemma of quality information disclosure in technology licensing," European Journal of Operational Research, Elsevier, vol. 294(2), pages 543-557.
    5. Masahiko Hattori & Yasuhito Tanaka, 2016. "License or entry with vertical differentiation in duopoly," Economics and Business Letters, Oviedo University Press, vol. 5(1), pages 17-29.
    6. Pires, Cesaltina Pacheco & Catalão-Lopes, Margarida & Jorge, Sílvia Ferreira & Garcês, Pedro, 2024. "Quality-price choices and market configurations when location matters," Economic Modelling, Elsevier, vol. 135(C).
    7. Xuan Nguyen & Chi†Chur Chao & Pasquale Sgro & Munirul Nabin, 2017. "Cross†border Travellers and Parallel Trade: Implications for Asian Economies," The World Economy, Wiley Blackwell, vol. 40(8), pages 1531-1546, August.
    8. Xu, Lili & Cho, Sumi & Lee, Sang-Ho, 2016. "Emission tax and optimal privatization in Cournot–Bertrand comparison," Economic Modelling, Elsevier, vol. 55(C), pages 73-82.
    9. Morita, Hodaka & Nguyen, Xuan, 2021. "FDI and quality-enhancing technology spillovers," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    10. Nguyen, Xuan & Chao, Chi-Chur, 2021. "Revenge consumption, product quality, and welfare," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 495-501.
    11. Hoe Sang Chung, 2020. "Quality choice and behavior-based price discrimination," Journal of Economics, Springer, vol. 131(3), pages 223-236, December.
    12. Chiara Conti & Pierfrancesco Reverberi, 2019. "Price discrimination and product quality under opt-in privacy regulation," DIAG Technical Reports 2019-07, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    13. Xingtang Wang & Lin Zhang, 2022. "Monopolistic third-degree price discrimination, welfare, and vertical market structure," Review of Economic Design, Springer;Society for Economic Design, vol. 26(1), pages 75-86, March.
    14. Torben Klarl, 2018. "Complementarity of willingness to pay and cost heterogeneity under vertical product differentiation: A welfare analysis," Journal of Evolutionary Economics, Springer, vol. 28(3), pages 591-607, August.
    15. Nguyen, Xuan, 2015. "On the efficiency of private and state-owned enterprises in mixed markets," Economic Modelling, Elsevier, vol. 50(C), pages 130-137.
    16. Conti, Chiara & Reverberi, Pierfrancesco, 2021. "Price discrimination and product quality under opt-in privacy regulation," Information Economics and Policy, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    Endogenous quality; Monopoly; Third-degree price discrimination; Vertical product differentiation; Welfare;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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