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Income dispersion and price discrimination

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  • Yong He

    (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - UPMF - Université Pierre Mendès France - Grenoble 2 - CNRS - Centre National de la Recherche Scientifique)

  • Guang-Zhen Sun

Abstract

This paper analyses the effects of inter-market and intra-market income heterogeneities on output and social welfare under uniform pricing and differential pricing regimes by considering a finite number of markets. We first derive the linear demand curve in each market under plausible conditions, and then show that more markets (and consumers) are excluded under uniform pricing the higher are the inter-market income differences. We also show that adding markets, even of lower income levels than those of existing markets, helps to decrease prices and thus cause more markets to be served. Implications of intra-market income dispersion are also explored.

Suggested Citation

  • Yong He & Guang-Zhen Sun, 2006. "Income dispersion and price discrimination," Post-Print halshs-00092701, HAL.
    • Handle: RePEc:hal:journl:halshs-00092701
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    References listed on IDEAS

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    1. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654, Elsevier.
    2. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    3. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

    1. Braouezec, Yann, 2016. "On the welfare effects of regulating the number of discriminatory prices," Research in Economics, Elsevier, vol. 70(4), pages 588-607.
    2. Micah L. Ingalls & Michael B. Dwyer, 2016. "Missing the forest for the trees? Navigating the trade-offs between mitigation and adaptation under REDD," Climatic Change, Springer, vol. 136(2), pages 353-366, May.
    3. Elena Sava & Laura Clemente-Harding & Guido Cervone, 2017. "Supervised classification of civil air patrol (CAP)," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 86(2), pages 535-556, March.
    4. Victor Kaftal & Debashis Pal, 2008. "Third Degree Price Discrimination in Linear‐Demand Markets: Effects on Number of Markets Served and Social Welfare," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 558-573, August.
    5. Yann Braouezec, 2013. "The Welfare Effects of Regulating the Number of Market Segments," Working Papers 2013-ECO-11, IESEG School of Management.

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