Welfare-increasing third-degree price discrimination

Simon Cowan

No 652, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The welfare and output effects of monopoly third-degree price discrimination are analyzed when inverse demand functions are parallel. Welfare is higher with discrimination than with a uniform price when demand functions are derived from the logistic distribution, and from a more general class of distributions. The sufficient condition in Varian (1985) for a welfare increase holds for these demand functions. Total output is higher with discrimination for a large set of demand functions including those derived from strictly log-concave distributions with increasing cost pass-through, such as the normal, logistic and extreme value, and standard log-convex demands.

Keywords: Third-degree price discrimination; monopoly; social welfare; output (search for similar items in EconPapers)
JEL-codes: D42 L12 L13 (search for similar items in EconPapers)
Date: 2013-04-22
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
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Citations: View citations in EconPapers (6)

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Journal Article: Welfare-increasing third-degree price discrimination (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:652

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