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Monopolistic third-degree price discrimination, welfare, and vertical market structure

Author

Listed:
  • Xingtang Wang

    (Guangdong University of Foreign Studies)

  • Lin Zhang

    (Guangdong University of Foreign Studies)

Abstract

This paper reconsiders the effects of monopolistic third-degree price discrimination on welfare in a vertical market. The results indicate that monopolistic downstream third-degree price discrimination increases social welfare when the input price is determined by suppliers, regardless of whether the quality is fixed or endogenously chosen.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:reecde:v:26:y:2022:i:1:d:10.1007_s10058-021-00254-7
    DOI: 10.1007/s10058-021-00254-7
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    References listed on IDEAS

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    1. Chin-Sheng Chen, 2017. "Price Discrimination in Input Markets and Quality Differentiation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 367-388, May.
    2. 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.
    3. Yongmin Chen & Marius Schwartz, 2015. "Differential pricing when costs differ: a welfare analysis," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 442-460, June.
    4. 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.
    5. 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.
    6. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    7. Stéphane Caprice, 2006. "Multilateral Vertical Contracting with an Alternative Supply: The Welfare Effects of a Ban on Price Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(1), pages 63-80, February.
    8. Ikeda, Takeshi & Toshimitsu, Tsuyoshi, 2010. "Third-degree price discrimination, quality choice, and welfare," Economics Letters, Elsevier, vol. 106(1), pages 54-56, January.
    9. Nguyen, Xuan, 2014. "Monopolistic third-degree price discrimination under vertical product differentiation," Economics Letters, Elsevier, vol. 125(2), pages 153-155.
    10. Takeshi Ikeda & Tatsuhiko Nariu, 2009. "Third-Degree Price Discrimination in the Presence of Asymmetric Consumption Externalities," Journal of Industry, Competition and Trade, Springer, vol. 9(3), pages 251-261, September.
    11. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
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    Cited by:

    1. Wang, Xingtang, 2022. "Input price discrimination, pricing contract and social welfare," Mathematical Social Sciences, Elsevier, vol. 119(C), pages 91-96.
    2. Xingtang Wang, 2023. "Who is more aggressive under vertical product differentiation?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 608-618, January.

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