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An empirical investigation of the welfare effects of banning wholesale price discrimination

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  • Villas-Boas, Sofia Berto

Abstract

Economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination: if downstream costs differences exist then discrimination shifts production inefficiently; towards high cost retailers; so a ban increases welfare; if differences in price elasticity of demand across retailers exist; discrimination may increase welfare if more market is covered; so a ban reduces welfare. Using retail prices and quantities of coffee brands sold by German retailers; I estimate a model of demand and supply and separate cost and demand differences. Simulating a ban on wholesale price discrimination has positive welfare effects in this market; and less if downstream cost differences shrink; or with less competition.

Suggested Citation

  • Villas-Boas, Sofia Berto, 2008. "An empirical investigation of the welfare effects of banning wholesale price discrimination," CUDARE Working Papers 120491, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:120491
    DOI: 10.22004/ag.econ.120491
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