Arbeitspapier

The welfare effects of third-degree price discrimination in a differentiated oligopoly

This paper studies the relationship between horizontal product differentiation and the welfare effects of third-degree price discrimination in oligopoly. By deriving linear demand from a representative consumer's utility and focusing on the symmetric equilibrium of a pricing game, we characterize the conditions relating to such demand properties as substitutability and complementarity for price discrimination to improve social welfare. In particular, we show that price discrimination can improve social welfare if firms' brands are substitutes in a market where the discriminatory price is higher and complements in one where it is lower, but welfare never improves in the reverse situation. We verify, however, that consumer surplus is never improved by price discrimination; welfare improvement by price discrimination is solely due to an increase in the firms' profits. This means that there is no chance that firms suffer from a prisoners' dilemma, that is, firms are better off by switching from uniform pricing to price discrimination.

Sprache
Englisch

Erschienen in
Series: ISER Discussion Paper ; No. 800

Klassifikation
Wirtschaft
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Welfare Economics: General
Production, Pricing, and Market Structure; Size Distribution of Firms
Oligopoly and Other Imperfect Markets
Thema
Third-Degree Price Discrimination
Oligopoly
Social Welfare
Horizontal Product Differentiation
Substitutability
Complementarity
Preisdifferenzierung
Konsumentenverhalten
Produktsubstitution
Oligopol
Theorie

Ereignis
Geistige Schöpfung
(wer)
Adachi, Takanori
Matsushima, Noriaki
Ereignis
Veröffentlichung
(wer)
Osaka University, Institute of Social and Economic Research (ISER)
(wo)
Osaka
(wann)
2011

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Adachi, Takanori
  • Matsushima, Noriaki
  • Osaka University, Institute of Social and Economic Research (ISER)

Entstanden

  • 2011

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