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Third-Degree Price Discrimination Revisited

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  • Youngsun Kwon

Abstract

Abstract: The author derives the probability that price discrimination improves social welfare, using a simple model of third-degree price discrimination assuming two independent linear demands. The probability that price discrimination raises social welfare increases as the preferences or incomes of consumer groups become more heterogeneous. He derives the average revenue curve of the price-discriminating monopoly, corresponding to its aggregated marginal revenue curve. The curve is non-linear and lies above the aggregated demand curve of simple monopoly. The results may be used to explain to students the effects of third-degree price discrimination on market outcomes.

Suggested Citation

  • Youngsun Kwon, 2006. "Third-Degree Price Discrimination Revisited," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(1), pages 83-92, January.
    • Handle: RePEc:taf:jeduce:v:37:y:2006:i:1:p:83-92
    DOI: 10.3200/JECE.37.1.83-92
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    Citations

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    Cited by:

    1. M Borland & R Howson, 2016. "A problem with the course presentation of the single-price alternative to 3rd-degree price discrimination," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 87-97, March.
    2. Park, Sungwook & Kwon, Youngsun, 2023. "Disentangling the effects on OTT platform performance of three strategies: Pricing, M&As, and content investments," Telecommunications Policy, Elsevier, vol. 47(8).
    3. Edward Lopez & David Molina, 2010. "Third-Degree Price Discrimination: Apology Not Necessary," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 383-397, December.
    4. Weber Sylvain & Pasche Cyril, 2008. "Price Discrimination," Journal of Industrial Organization Education, De Gruyter, vol. 2(1), pages 1-15, January.

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