two valuation questions in one survey is it a recipe for sequencing and instrument context effects economic theory suggests that willingness to pay for two goods independently offered should remain unchanged when the survey instrument changes slightly four survey treatments consisting of comprehensive good and a subset of that good were used the surveys alternated in the question ordering and in the embedded good which accompanied the comprehensive good we tested for sequencing and instrument context effects using both a combined and split sample designs in the combined sample case we found some evidence to sequencing effects in the data containing the first subset good likelihood ratio tests indicated that sequencing did not effect scale or location of parameters in the test for instrument context effects evidence was found indicating context does effect willingness to pay estimates

colluding on relative prices firms sometimes agree to limit the discounts they offer a class of customers i e they collude on the price differences across consumer classes why courts have struck down agreements to limit discounts as violations of the laws against price fixing are these collusive agreements in fact efficient this article addresses these questions in a multiproduct duopoly model under one interpretation the incentive to collude on relative prices can be traced to heterogeneity in consumers time costs under fairly general conditions total surplus increases with the collusion this efficiency effect is most striking in the case where collusion raises the prices faced by all consumers over which firms compete

a comparison of willingness to pay estimation techniques from referendum questions referendum style willingness to pay questions have been used to estimatepassive use values this referendum question format method may beproblematic for many reasons including the statistical techniques used toestimate willingness to pay from discrete responses this paper comparesa number of parametric semi nonparametric and nonparametric estimationtechniques using data collected from us households regarding federalprotection of endangered fish species the advantages and disadvantagesof the various statistical models used are explored a hypothesis test forstatistical equality among estimation techniques is performed using ajackknife bootstrapping method when the equality test is applied themodeling techniques do show significant differences in some possiblecomparisons but only those that are nonparamentric this can lead toconflicting interpretations of what the data show resource managers andpolicy analysts need to use caution when interpreting results until anindustry standard can be developed for estimating willingness to pay fromclosed ended questions

third degree price discrimination with interdependent demands this paper analyzes the price output and welfare effects of third degree price discrimination for a monopolist who sells in two interdependent markets the case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes the economic effects of price discrimination are shown to depend on the type and strength of demand interdependence the curvature of the demands and the slope of marginal cost the circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed

third degree price discrimination under economies of scale there has long been a controversy in economics about whether or not a firm with monopoly power should be allowed to exploit its monopoly power by engaging in third degree price discrimination the effect of third degree price discrimination on welfare is two fold 1 output under price discrimination is misallocated because different groups are charged different prices but 2 if total output is different under price discrimination than under uniform pricing this will also affect welfare 2 schmalensee 8 varian 11 12 and schwartz 9 have shown that price discrimination must decrease welfare if output under price discrimination is the same or less than output under uniform pricing this fundamental result is quite robust and holds regardless of the number of sub markets or the behavior of marginal cost rising constant or falling it also holds even if the sub market demands are interdependent a necessary but not sufficient condition for price discrimination to be beneficial is that it increase total output perhaps the most common situation in which price discrimination will be beneficial is the case where only one sub market is served under uniform pricing but two or more sub markets are served under price discrimination in this case hausman and mackie mason 3 have pointed out that price discrimination will result in a pareto welfare improvement if marginal cost is constant or falling even when price discrimination does not open up new markets hausman and mackie mason 3 and nahata ostaszewski and sahoo 5 have shown that price discrimination can result in a pareto improvement by lowering prices in all sub markets hausman and mackie mason 3 257 argue that price discrimination is most likely to be beneficial when economies of scale are present 3

pareto price discrimination abstract as the collection of consumer data becomes more common online merchants are better equipped to price discriminate now more than ever before while standard first degree price discrimination benefits merchants and harms consumers relative to uniform pricing i derive an alternative first degree pricing strategy that achieves efficiency and pareto improves upon the uniform pricing equilibrium furthermore i show that price ceilings can enforce these pareto price discrimination strategies making pareto price discrimination a viable option for merchants and policy makers

costly price discrimination abstract standard theory neglects that enacting price discrimination is costly to firms when this costliness is accounted for perfect price discrimination is often socially inefficient for pure monopolists it is sometimes socially inefficient for monopolistic competitors it is always socially inefficient

bounding the welfare effects of third degree price discrimination under pigouvian third degree price discrimination a profit maximizing monopolist typically charges different groups of customers different prices resale between groups is assumed to be impossible these differences in price entail a loss of efficiency because marginal valuations of the output are not equal across buyers the net welfare effect of allowing price discrimination is ambiguous though because the total output under discrimination may exceed that under uniform pricing nevertheless under quite general conditions third degree price discrimination by a monopolist can increase static welfare only if total output is greater under discriminatory pricing than under uniform pricing richard schmalensee 1981 hal r varian 1985 marius schwartz 1990 although there has been much analysis of whether price discrimination raises or lowers total output or welfare the size of these effects has remained largely unexplored varian 1985 compares discriminatory pricing to uniform pricing for a monopolist and provides some bounds for the change in welfare in terms of market prices and outputs but these relationships give little sense of the relative size of welfare changes resulting from third degree price discrimination i address this issue by asking what can be said about the ratio wd wu where wd and wu denote welfare under discriminatory and uniform pricing respectively welfare is measured as the sum of producer surplus and marshallian consumer surplus section i provides two examples showing that this ratio can range from zero to infinity in these examples all markets are served under uniform pricing and demand in one of the markets is strictly convex considering a two market model in which a monopolist with constant marginal cost serves two independent markets under uniform pricing i show in section iii that if demands in both markets are concave then wd w is bounded below by 2 the assumptions of constant marginal cost and independent demands allow producer surplus and consumer surplus to be identified separately for each market separability across markets is central to the approach taken in this paper following joan robinson 1933 i call a market strong weak if the discriminatory price in that market is at least as great as no greater than the profit maximizing uniform price surprisingly the key to bounding wd wu is that the demand function in the weak market be concave if one market is strong the other is weak and demand in the weak market is concave then wd w can be bounded above by 2 5 or even 1 75 or 1 6 with additional assumptions on the demand functions these bounds arise for several reasons first the monopolist s profit under uniform pricing must be at least as large as the profit in the weak market under discrimination moreover if at all prices demand in the strong market is as great as in the weak market then profit under uniform pricing must be at least twice as great as profit in the weak market under discrimination otherwise the monopolist could do better by charging the monopoly price for the weak market second this relationship between profits in the two markets is useful in bounding welfare because welfare in each market can be related to profit in that market section ii shows that if demand is con department of economics and a b freeman school of business tulane university new orleans la 70118 i thank marius schwartz and two anonymous referees for their comments on earlier drafts of this paper

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

quality differences third degree price discrimination and welfare we propose a model with two markets to analyze the welfare implications of price discrimination with quality differences in each market a local firm that operates in that market only competes against a global firm that operates in both markets local firms produce higher quality goods than the global firm if the quality levels of the local firms products are the same price discrimination is never welfare decreasing if they differ discrimination is welfare increasing if quantity increases because of a positive allocation effect of price discrimination there are parameter values such that welfare increases while total output decreases with price discrimination jel d43 d60

third degree price discrimination consumption externalities and social welfare this paper analyses monopolistic third degree price discrimination in the presence of consumption externalities within two separate markets assuming linear inverse demands we investigate an associated change in social welfare the sum of the consumers surpluses and the producer s profit with the regime change from uniform pricing to price discrimination when both markets are open under either regime it is shown that social welfare can improve even if total output is unaffected by the regime change moreover it is possible that the sum of the consumers surpluses also increases

what s the use welfare estimates from revealed preference models when weak complementarity does not hold abstract in this paper we consider the theoretical and empirical ramifications of welfare measurement in revealed preference models when weak complementarity does not hold in the context of a kuhn tucker model of recreation demand we show that while it is possible to estimate preferences that do not appear to exhibit weak complementarity the calculation of welfare measurements from these models requires a cardinal interpretation of preferences that cannot be tested furthermore we reiterate the under appreciated fact that even traditional use value estimates require a cardinal restriction on preferences that while often intuitive also cannot be tested we demonstrate empirically that the choice of restrictions can have significant ramifications as use value estimates can vary based on the assumed preference structure

mr keynes and the post keynesians principles of macroeconomics for a monetary production economy attempts to establish the methodological connections between keynes s uncertainty concept and the evolving post keynesian literature it also considers why the hicksian islm keynesian approach went off the careful analytic tracks laid down by keynes

cut throat fringe competition in an emerging country market tax evasion or the absence of market power brazil s established soft drink firms recently lost ground to multiple low price entrants with small scale operations and minimal advertising while incumbents attributed such undercutting to entrants lower costs from non compliance with the law generics counterargued that incumbents high prices stemmed from unilateral market power rather than cost heterogeneity by estimating a structural model i can single handedly explain established brands high prices through low equilibrium price elasticities of demand tax evasion in the fringe while plausible appears to be offset by higher procurement costs or less efficient scale more generally a competitive informal sector can alleviate the allocative distortions in certain concentrated industries

on measuring the value of a nonmarket good using market data we use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good we present in detail a numerical method of measuring the value of nonmarket goods using market data under either weak neutrality or weak complementarity our numerical method is more flexible than the existing analytical method because it can be used with any well behaved marshallian demand function and can be used even when the willig condition does not hold

durable goods monopoly with limited choice of commitment strategy when should the monopolist precommit consider a firm a monopolist offering a unique product to a fixed number of potential customers suppose that no consumer desires more than one unit of the good within a given period or across periods that is there is no value to repeat purchases in addition suppose that customers vary with respect to their initial reservation prices which decline over time a natural interpretation is that the monopolist is selling a good that is durable alternatively the firm is providing an entertainment or fashion good consumers may place a premium on obtaining the product quickly before it becomes less useful less stylish or less novel coase 7 conjectured that this firm s ability to extract surplus is limited because the firm has to compete with itself across time periods high valuation customers would be unwilling to pay a high initial price because they would anticipate that over time the firm will be reducing the price in order to sell to lower valuation customers subsequent literature formalizes this as a time inconsistency problem faced by a monopolist unable to make intertemporal commitments a separate strand of the literature proceeds from the polar assumption that the monopolist can precommit to any multiperiod pricing strategy comparison to coase s monopolist is simple higher profits are obtainable under precommitment because more surplus is extracted from high valuation customers an important proposition due to stokey 22 is that it will be optimal for the monopolist to precommit to a declining intertemporal price schedule if consumers with higher initial valuations have a higher rate of time preference 2 otherwise the optimal strategy is to hold price constant at the static monopoly level and to sell no more than the static monopoly quantity 3

parallel imports demand dispersion and international price discrimination parallel imports goods imported by unauthorized resellers are advocated worldwide for undermining international price discrimination for a continuum of markets we find that uniform pricing by a monopolist yields lower global welfare than third degree discrimination if demand dispersion across markets is large though uniform pricing avoids output misallocation too many markets go unserved mixed systems permitting discrimination across but not within designated groups of markets yield significantly higher welfare than uniform pricing or unrestricted multimarket discrimination and can pareto dominate uniform pricing thus while parallel imports might benefit some countries our results weaken the multilateral case for allowing them

the welfare effects of third degree price discrimination in intermediate good markets the case of bargaining this article examines the welfare effects of third degree price discrimination by a monopolist selling to downstream firms with bargaining power one of the downstream firms the chain store can integrate backward at lower cost than rivals bargaining powers also depend on disagreement profits bargaining weights and concession costs if the chain s integration threat is not credible price discrimination reduces the input price charged symmetric downstream firms and often reduces the average input price charged asymmetric downstream firms

parallel imports and repair services abstract this study explores the welfare effects of parallel imports when the producer may refuse to provide repair services for parallel imported units which reduces the degree of price convergence between countries if the probability of the product s breakdown is endogenously determined by the producer permitting parallel imports could increase the probability because a higher probability leads to a larger price gap as a result it is possible that prices increase and welfare deteriorates in both countries this negative welfare effect is more likely to emerge as the liberalization of trade in goods proceeds the prohibition of service discrimination recovers the positive welfare effect

reconsidering the use of hicks neutrality to recover total value abstract in this paper i reconsider the use of hicks neutrality for recovering total value for a change in an environmental good i clarify the need to adjust expenditures and explain how numerical techniques can be used in approximating these adjustments i show that the circumstance believed to support hicks neutrality weak neutrality at the choke price vector is a case of weak complementarity i mathematically demonstrate that the necessary degree of hicks neutrality is unlikely to be satisfied i derive the ensuing relative bias and show its usefulness in selecting goods which may approach hicks neutrality

price discrimination in australia s retail electricity markets an analysis of victoria southeast queensland when capital intensive monopoly industries are restructured and deregulated consumer prices commence a natural drift from regulated uniform average cost tariffs to competitive differential prices and this can raise problems for policymakers deep discounts are welcomed high standing offers are not but price discrimination is unremarkable in economics indeed in industries where fixed sunk costs represent a significant portion of total cost discriminatory pricing is usually welfare enhancing conversely theory predicts and empirical evidence confirms that regulatory efforts to cherry pick differential prices in asymmetric markets will damage consumer welfare in this article we analyse differential retail electricity offer prices in the australian states of victoria and queensland and contrast these with industry average total cost and the marginal cost of retail supply we find deregulated victoria displays high price dispersion with standing offer tariffs 10 above industry average total cost and marginal offers at break even prices i e 20 below average total cost in the semi regulated southeast queensland market where a regulated price cap exists there is lower dispersion but marginal offers include a 6 7 retail mark up efficient pricing requires the marginal unit produced to be priced at marginal cost and victoria meets this criteria but we identify an episode of inter consumer misallocation due to high standing offers we conclude policy initiatives designed to help firms shift vulnerable households from standing offer tariffs is desirable

upstream and downstream pollution taxations in vertically related markets with imperfect competition when two markets are vertically related the government can control pollution at the upstream as well as the downstream market levels this paper employs the stylized model of input price discrimination and compares the effectiveness of upstream and downstream pollution taxations we consider the situation in which downstream firms have heterogeneous abatement technologies and an upstream monopolist performs input price discrimination against them in order to mitigate pollution the government imposes input tax on the intermediate inputs and emission tax on the pollutant we show that the degree of input price discrimination decreases with a rise in the input tax and increases with a rise in the emission tax we further examine the effect of a green tax reform in which the government changes the source of taxation from input tax to emission tax we argue that although this green tax reform may reduce the tax revenue of the government it will certainly increase social welfare

a note on third degree price discrimination with interdependent demands by incorporating symmetric interdependency into linear demands this note shows that monopolistic third degree price discrimination can improve social welfare even if total output remains the same a result that counters one of the main results presented in layson this journal 1998 it is also shown that this positive change in social welfare benefits the monopoly side but that consumers surplus decreases as a whole

um modelo macrodinâmico pos keynesiano de simulacao com progresso tecnico endogeno palavras chave economia pos keynesiana crescimento economico e flutuacoes abstract the objective of this article is to present the structure and the first computational simulations of a one sector macrodynamic model that imbed some elements of the post keynesian theoretical framework the theoretical elements embed in the model are i determination of the level of output by the principle of effective demand ii differentiated savings propensities of capitalists and workers iii mark up pricing iv investment decision based on minskys two price theory v importance of firmss capital structure over the level of aggregate investment vi inflation based on distributive conflict between capitalists and workers vii endogenous money and ix endogenous technical progress the computational simulations of the model reproduce some important features of capitalist dynamics as cyclical growth i e irregular but bounded fluctuations of the growth rate of real gdp the occurrence of a single great depression over the entire simulation period what resembles the rare nature of great crises in the history of capitalism the computational simulation also shows that a big reduction in inflation rate in a short period spam will be accompanied by a great financial fragility of productive firms which sooner or latter will generate a great depression as a corollary of these results follows that the central bank should conduct monetary policy in a way to avoid very rapid reduction in inflation rate

price discrimination in input markets quantity discounts and private information we consider a monopolistic supplier s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs under discriminatory pricing downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs under uniform pricing the same wholesale tariff is offered to all downstream firms in contrast to the extant literature on price discrimination with nonlinear wholesale tariffs we find that banning discriminatory wholesale contracts often improves welfare this also holds if the manufacturer is not an unconstrained monopolist moreover uniform pricing increases downstream investments in cost reduction in the long run

refusals to deal and orders to supply in competitive markets abstract a number of recent antitrust cases in north america and europe have involved allegations that manufacturers of durable products have refused to supply parts to independent service organizations apparently to monopolize the market for repairs of their products this paper analyzes such refusals in a competitive market and connected aftermarket in this model the refusals help to support higher prices for high intensity high value users however these higher charges permit the recovery of higher costs incurred during an initial warranty period since full prices equal full marginal costs in equilibrium the refusals permit the attainment of a first best outcome and an attempt by antitrust authorities to force supply will be welfare reducing

market opening under third degree price discrimination there are frequently regulatory and antitrust pressures for firms to cease price discrimination and practice uniform pricing such pressures however generally have negative welfare consequences when they lead to weaker markets not being served this paper derives conditions that determine when price discrimination will induce service to a market market opening that would not be served under a regime of price uniformity the factors that favor market opening under price discrimination are a large market share for the strong market profit margins in the two markets that are far apart and concave rather than convex demand curves copyright 1994 by blackwell publishing ltd

welfare and output in third degree price discrimination a note abstract one main result on the welfare effects of third degree price discrimination by a monopolist is that an increase in total output is a necessary condition for welfare improvement this note provides two examples showing that this proposition does not generalize to an oligopoly with heterogenous firms in these examples price discrimination makes competition more favorable to the low cost firm this induces a cost saving that overcomes the welfare loss associated with price discrimination

third degree price discrimination in input markets output and welfare if price discrimination is realized the economy shifts from one equilibrium to another it clearly involves welfare effects the price discriminator clearly gains some consumers may also gain from the price cut but others may lose faced with higher prices etc traditionally the change in social welfare is known to be closely related to the change in total output in the case of third degree price discrimination it is well known that an increase in total output is a necessary condition for welfare improvement richard schmalensee 1981 proves this fact in a model in which the monopolist with constant marginal cost can perfectly separate markets further hal r varian 1985 extends this result to the case of interdependent markets permnitting increasing marginal cost of the monopolist and finally the assumption of nondecreasing marginal cost is eliminated by marius schwartz 1990 roughly speaking this proposition says that if there is a welfare gain from price discrimination there has to be some gain to offset the distortion involved on the other hand the vast majority of legal and other policy disputes over the price discrimination concern input markets not final good markets thus it seems important to investigate the situation in which a discriminating monopolist is not a final good supplier but an input supplier and the buyers of the input are downstream producers of a final good as is assumed in this paper if the downstream firms have different technologies their input demand functions will be different and thus the monopolist has an incentive to price discriminate in this scenario michael l katz 1987 and patrick degraba 1990 study the effect of inputmarket price discrimination and show that price discrimination always lowers welfare because it involves the distortion that a lower cost downstream firm is assigned a higher price unfortunately in their simple settings on the technology of downstream industry price discrimination can never change total output of the input or of the final good 1 thus we must say that welfare effect of input market price discrimination remains open to question if it has some effect on total output in particular we are curious as to whether we can obtain some close relationship between the changes in welfare and total output as we have obtained in the final good market settings with this motivation we will construct a model which involves change in total output of the final good in the next section the model and assumptions are provided in section ii after we extend the result of katz 1987 and degraba 1990 we find a relationship between the changes in welfare and total output strikingly it states that an increase in the total output of the final good is a sufficient condition for welfare deterioration this result contrasts with that obtained by schmalensee 1981 varian 1985 and schwartz 1990 from usual models of price discrimination in a final good market section iii concludes the analysis

third degree price discrimination in linear demand markets effects on number of markets served and social welfare author affiliation victor kaftal department of mathematical sciences 839 c old chemistry building university of cincinnati cincinnati oh 45221 usa victor kaftal uc edudebashis pal department of economics 1204 crosley tower university of cincinnati cincinnati oh 45221 debashis pal uc edu corresponding author acknowledgment we are grateful to rick harbaugh laura razzolini david sappington and two anonymous reviewers debashis pal is also grateful to taft research center for financial support 1 introductiondoes monopolistic third degree price discrimination reduce social welfare the question has continued to intrigue economists and policy makers for more than half a century the seminal work of robinson 1933 shows that if a monopolist with a constant marginal cost sells in two distinct and independent markets having linear demands then welfare falls with third degree price discrimination almost half a century later schmalensee 1981 reexamines robinson s result and demonstrates that for any number of markets with linear demands third degree price discrimination lowers welfare schmalensee 1981 also establishes more generally that price discrimination increases welfare only if it increases aggregate output subsequently using ingenious duality approaches varian 1985 and schwartz 1990 generalize the results for correlated demands and nonlinear marginal costs 1it is therefore well known that for linear market demands and constant marginal costs monopolistic third degree price discrimination indeed lowers welfare it is important to note however that the welfare reducing effect of third degree price discrimination is derived under a crucial assumption it is assumed that if the monopolist is forced to charge the same price in all markets uniform pricing the monopolist would sell a positive quantity in each market in a recent article cowan 2007 considers various forms of nonlinear demands and presents the necessary and sufficient and or sufficient conditions for price discrimination to reduce welfare cowan 2007 however also assumes that all markets are served under uniform pricing yet when this assumption does not hold the welfare effects of monopolistic third degree price discrimination turn out to be significantly more intricate observe that when all markets are not served under uniform pricing price discrimination may increase welfare because price discrimination may serve markets that would not be served under uniform pricing thus relative to uniform pricing price discrimination has two countervailing effects on welfare aggregate welfare goes down in those markets that are originally served under uniform pricing whereas welfare goes up in those markets that are not served under uniform pricing therefore the additional welfare from the new markets under price discrimination may offset any loss of welfare in the markets that are originally served under uniform pricing the point is strongly emphasized in schmalensee s 1981 seminal work in the context of prescription drugs an identical sentiment is recently echoed in varian 2000 in the context of two markets the possibility of price discrimination opening up new markets is first analyzed graphically by battalio and ekelund 1972 layson 1994 also considers two markets but includes nonlinear demands and presents conditions for opening of new markets based on endogenous features such as elasticities in the context of patent policy opening of new markets by price discrimination is explicitly incorporated by hausman and mackie mason 1988 using two markets they show that price discrimination by a patent holder is socially desirable in many cases because it allows the patent holder to open new markets there is a related literature in spatial economics beginning with greenhut and ohta 1972 and holahan 1975 that deals with spatial price discrimination and market opening with linear demand

the welfare effects of third degree price discrimination in a differentiated oligopoly this article examines the welfare effects of third degree price discrimination under oligopolistic competition with horizontal product differentiation we derive a necessary and sufficient condition for price discrimination to improve social welfare the degree of substitution must be sufficiently greater in the strong market where the discriminatory price is higher than the uniform price than in the weak market where it is lower it is verified however that consumer surplus is never improved social welfare improves solely owing to an increase in the firms profits in the case of linear demands jel d43 l11 l13 i introduction this article examines the welfare effects of oligopolistic third degree price discrimination explicitly considering product differentiation as a source of market power and strategic interaction product differentiation is one of the main reasons why firms can enjoy market power it enables them to sell products that are no longer perfect substitutes for example coca cola and pepsico sell similar types of soda although it is arguable that they differ in taste each firm thereby attracts some consumers over another as a form of price discrimination coca cola was once reported to be testing a vending machine that would automatically raise prices in hot weather 1 although the plan triggered nationwide controversy and coca cola had to abandon the project as a result it could have changed the regime of uniform pricing to one of price discrimination in the soda market how would the resulting change affect consumer welfare and firms profits in other words is third degree price discrimination good or bad answering this question is important because it helps us to evaluate price discrimination under oligopoly in this article we focus on horizontal product differentiation to consider substitutability as well as complementarity 2 by assuming a linear quadratic utility function of a representative consumer and focusing on the symmetric equilibrium of a pricing game we characterize the conditions relating to such demand properties as substitutability and complementarity required for price discrimination to improve social welfare more specifically we derive a necessary and sufficient condition for price discrimination to improve social welfare the degree of substitution must be sufficiently greater in the strong market where the discriminatory price is higher than the uniform price than in the weak market where it is lower it is also shown that aggregate output must increase for price discrimination to improve social welfare we verify however that consumer surplus is never improved by price discrimination welfare improvement from price discrimination is solely owing to an increase in firms profits in the example above the degree of substitution would be higher in the strong market i e when the temperature is high because consumers care less about which brand when it is hot weather our analysis below implies that social welfare might improve in this case the degree of substitution can vary across markets even if consumers in each market face exactly the same products because consumers taste depends on various market specific factors such as geographical and natural conditions if the strong market is where consumers demand a product more eagerly caring less about which brand in the above example individuals demand soda more eagerly in hot weather then our results suggest that price discrimination has large potential to improve social welfare 3 why does allowing price discrimination improve social welfare notice that there are two forces that determine equilibrium prices in price setting oligopoly a larger market size raises the price whereas a larger substitutability parameter lowers the price for price discrimination to raise social welfare it is necessary that a high degree of substitutability mitigates an increase in the discriminatory price in the larger market

monopolistic third degree price discrimination under vertical product differentiation this paper shows in a vertical product differentiation model with variable costs of quality that monopolistic third degree price discrimination always reduces welfare regardless of whether the quality is fixed or is endogenous the results provide rich implications for antitrust policy

taxation and the output and welfare of third degree price discrimination the literature on third degree price discrimination dates back to the work by pigou 14 and joan robinson 15 over half a century ago the subsequent works on the output effect can be seen in edwards 3 silberberg 19 battalio and ekelund 1 greenhut and ohta 7 finn 4 smith and formby 20 formby et al 6 and shih mai and liu 18 the welfare effect by yamey 26 was expanded and generalized by schmalensee 16 varian 24 and schwartz 17 in addition nahata ostaszewski and sahoo 12 demonstrate a sufficient condition for price changes that guarantees a welfare increase with the twice differentiable and monotonically decreasing demand functions previous work on third degree price discrimination has not addressed the issue of taxation governments often levy excise taxes on firm s sales under conditions of third degree price discrimination such taxes can have depending upon the form of the tax quite different output and welfare effects this paper investigates the joint effects of third degree price discrimination and excise taxation in several different ways first in a fashion analogous to suits and musgrave s analysis of simple non discriminating monopoly 22 we consider the effects of ad valorem and unit specific excise taxes at a constant level of output but in a third degree price discrimination environment second in a similar manner we compare cost and demand ad valorem taxes and the so called musgravian transformation 11 27 under discriminatory conditions finally we compare the output and welfare effects of a specific cost ad valorem and demand ad valorem excise tax that generate the same level of revenues in a third degree price discrimination environment

input price discrimination in the presence of downstream vertical differentiation abstract this paper investigates the competitive effects of input price discrimination ipd in a setting in which an upstream monopolist produces an essential input supplied to the downstream market where there is competition between two vertically differentiated retailers two different input pricing regimes are investigated i the uniform pricing regime in which third degree input price discrimination is prohibited and i i a discriminatory pricing regime under which the upstream monopolist may charge different prices to the two downstream firms we find that despite favoring the low quality firm ipd is welfare enhancing if and only if the quality gap is sufficiently high

gender based price discrimination in matching markets this paper develops a new model to analyze price discrimination in matching markets where agents have private information about their respective qualities on the basis of signals car clothing club membership etc purchased from profit maximizing firms men and women form beliefs about each other s qualities the matching must then be stable in the following sense there cannot be a man and woman who are unmatched and who both believe they would be better off if they were matched with one another the model enables an analysis of the impact of third degree or gender based price discrimination on welfare when third degree price discrimination is not feasible the cost of eliciting private information is higher but a monopoly intermediary may have stronger incentives to implement an efficient allocation i show that gender based price discrimination is more likely to have a positive impact the more symmetric the matching environment is