IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/205.html
   My bibliography  Save this paper

The welfare effects of third-degree price discrimination

Author

Listed:
  • Simon GB Cowan
  • Simon Cowan

Abstract

The welfare effects of third-degree price discrimination are known to be negative when demand functions are linear, marginal cost is constant and all markets are served. This paper shows that discrimination lowers welfare for a more general class of demand functions. Demand varies across markets with additive and multiplicative shift factors. Total welfare (defined as consumer surplus plus profits) with discrimination is lower than with uniform pricing when the density function of consumer valuations satisfies a weak version of concavity that encompasses logconcavity. Most standard demand functions including linear, quadratic, probit, logit, exponential and iso-elastic ones, satisfy this assumption, which is also a weak sufficient condition for existence.

Suggested Citation

  • Simon GB Cowan & Simon Cowan, 2004. "The welfare effects of third-degree price discrimination," Economics Series Working Papers 205, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:205
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:927c5a50-c6ad-4e4c-88a6-625f9fb4b12e
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simon Cowan, 2016. "Welfare-increasing third-degree price discrimination," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 326-340, May.
    2. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    3. Tomohiro Ara & Arghya Ghosh, 2012. "Bargaining, Tariffs and Vertical Specialization," Discussion Papers 2012-14, School of Economics, The University of New South Wales.
    4. Alexandre de Corniere & Romain De Nijs, 2013. "Online Advertising and Privacy," Economics Series Working Papers 650, University of Oxford, Department of Economics.

    More about this item

    Keywords

    Price Discrimination; Monopoly;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Pouliquen (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.