[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/462.html
   My bibliography  Save this paper

Third-Degree Price Discrimination and Consumer Surplus

Author

Listed:
  • Simon GB Cowan
  • Simon Cowan
Abstract
This paper presents simple conditions for monopoly third-degree price discrimination to have negative or positive effects on aggregate consumer surplus. Consumer surplus is often reduced by discrimination, for example when total welfare (consumer surplus and profits) falls. Surplus increases with discrimination, however, in two cases: first, when the marginal revenues without discrimination are close together and inverse demand in the market where the price will fall with discrimination is more convex; second, when inverse demand functions are highly convex and the discriminatory prices are close together.

Suggested Citation

  • Simon GB Cowan & Simon Cowan, 2009. "Third-Degree Price Discrimination and Consumer Surplus," Economics Series Working Papers 462, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:462
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:fdfab926-21c6-4476-9b90-d19432841c55
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeremy Bulow & Paul Klemperer, 2009. "Price Controls and Consumer Surplus," Economics Papers 2009-W07, Economics Group, Nuffield College, University of Oxford.
    2. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-247, March.
    3. Malueg, David A. & Snyder, Christopher M., 2006. "Bounding the relative profitability of price discrimination," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 995-1011, September.
    4. T. Beard & Michael Stern, 2008. "Bounding consumer surplus by monopoly profits," Journal of Regulatory Economics, Springer, vol. 34(1), pages 86-94, August.
    5. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
    6. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
    7. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-250, March.
    8. Shih, Jun-ji & Mai, Chao-cheng & Liu, Jung-chao, 1988. "A General Analysis of the Output Effect under Third-Degree Price Discrimination," Economic Journal, Royal Economic Society, vol. 98(389), pages 149-158, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon Cowan, 2007. "The welfare effects of third-degree price discrimination with nonlinear demand functions," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 419-428, June.
    2. Simon GB Cowan & Simon Cowan, 2008. "When does third-degree price discrimination reduce social welfare, and when does it raise it?," Economics Series Working Papers 410, University of Oxford, Department of Economics.
    3. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    4. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    5. Takanori Adachi & Noriaki Matsushima, 2014. "The Welfare Effects Of Third-Degree Price Discrimination In A Differentiated Oligopoly," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1231-1244, July.
    6. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 585-637.
    7. Rhodes, Andrew & Zhou, Jidong, 2022. "Personalized Pricing and Competition," MPRA Paper 112988, University Library of Munich, Germany.
    8. Aguirre, Iñaki, 2019. "Oligopoly price discrimination, competitive pressure and total output," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-16.
    9. Markus Dertwinkel‐Kalt & Christian Wey, 2023. "Third‐Degree Price Discrimination in Oligopoly when Markets are Covered," Journal of Industrial Economics, Wiley Blackwell, vol. 71(2), pages 464-490, June.
    10. Simshauser, Paul & Whish-Wilson, Patrick, 2017. "Price discrimination in Australia's retail electricity markets: An analysis of Victoria & Southeast Queensland," Energy Economics, Elsevier, vol. 62(C), pages 92-103.
    11. Shi, Guanming & Chavas, Jean-Paul & Stiegert, Kyle W., 2008. "An Analysis of Bundle Pricing: The Case of the Corn Seed Market," Staff Papers 92212, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    12. Sofia Berto Villas‐Boas, 2009. "An empirical investigation of the welfare effects of banning wholesale price discrimination," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 20-46, March.
    13. Akio Kawasaki, 2023. "Pricing Strategies and Partial Privatization Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(3), pages 293-319, May.
    14. Akio Kawasaki, 2020. "Airport pricing strategy by hub airports: does the number of local airports matter?," Asia-Pacific Journal of Regional Science, Springer, vol. 4(3), pages 835-857, October.
    15. Zheng Zhang & Yingtong Wang & Qingchun Meng & Qiang Han, 2022. "Impact of Third-Degree Price Discrimination on Welfare under the Asymmetric Price Game," Mathematics, MDPI, vol. 10(8), pages 1-16, April.
    16. Miravete, Eugenio & Seim, Katja & Thurk, Jeff, 2013. "Complexity, Efficiency, and Fairness of Multi-Product Monopoly Pricing," CEPR Discussion Papers 9641, C.E.P.R. Discussion Papers.
    17. Galera, Francisco & Zaratiegui, Jesus M., 2006. "Welfare and output in third-degree price discrimination: A note," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 605-611, May.
    18. Rosa Branca Esteves, 2009. "A Survey on the Economics of Behaviour-Based Price Discrimination," NIPE Working Papers 5/2009, NIPE - Universidade do Minho.
    19. repec:ebl:ecbull:v:4:y:2008:i:11:p:1-11 is not listed on IDEAS
    20. Akio Kawasaki, 2022. "Pricing Strategies and Partial Privatization Policy Based on Complementary Competitive Market," Journal of Industry, Competition and Trade, Springer, vol. 22(1), pages 99-123, March.
    21. Aguirre Iñaki, 2016. "On the Economics of the “Meeting Competition Defense” Under the Robinson–Patman Act," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1213-1238, September.

    More about this item

    Keywords

    Third-degree price discrimination; Monopoly; Consumer surplus;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:462. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.