water pricing policies public decision making and farmers response implications for water policy abstract the problems caused by water scarcity demand important changes in the criteria and objectives of water policies the agricultural sector in spain consumes up to 80 of all available hydric resources and the need to increase the efficiency of current uses of water in the agricultural sector is at the core of the country s national water policy one alternative would be to resort to water pricing policies with the aim of providing incentives to save water consumption although it would inflict a certain degree of income losses to the farmers and raise the revenue collected by the water authorities the objective of this research is to analyze the effect caused by the application of different water pricing policies on water demand farmers income and the revenue collected by the government agency to undertake this analysis a dynamic mathematical programming model has been built that simulates farmers behavior and their response to different water pricing scenarios empirical application of the model has been carried out in several irrigation districts in spain covering varied farm regions and river basins results show that the effects of alternative pricing policies for irrigation water are strongly dependent on regional structural and institutional conditions and that changing policies produce distinct consequences within the same region and water district thus equivalent water charges would create widespread effects on water savings farm income and collected government revenue across regions and districts

water and energy price impacts on residential water demand in copenhagen while water price effects on residential water demand have been studied for several decades the impact of energy prices does not seem to have received much attention in this paper a residential water demand function derived from a model of household production of final consumption goods taking water energy and an aggregate of other goods as inputs is estimated on pooled time series data we find negative energy cross price elasticities around 0 2 and water price elasticities in the order of 0 1 or smaller

evaluating the impacts of real time pricing on the usage of wind generation one of the impediments to large scale use of wind generation within power systems is its nondispatchability and variable and uncertain real time availability operating constraints on conventional generators such as minimum generation points forbidden zones and ramping limits as well as system constraints such as power flow limits and ancillary service requirements may force a system operator to curtail wind generation in order to ensure feasibility furthermore the pattern of wind availability and electricity demand may not allow wind generation to be fully utilized in all hours one solution to these issues which could reduce these inflexibilities is the use of real time pricing rtp tariffs which can both smooth out the diurnal load pattern in order to reduce the impact of binding unit operating and system constraints on wind utilization and allow demand to increase in response to the availability of costless wind generation we use and analyze a detailed unit commitment model of the texas power system with different estimates of demand elasticities to demonstrate the potential increases in wind generation from implementing rtp

privately operated water utilities municipal price negotiation and estimation of residential water demand the case of france this paper addresses the issue of price negotiation between a municipality and a private water utility operator and its implications for residential water demand estimation we use appropriate econometric procedures to estimate a water demand equation on a panel of french municipalities we find evidence that negotiated water price depends on municipality s characteristics causing endogeneity of price in the demand equation the impact of average household income housing and system features such as metering is investigated both on municipal consumption and price estimated price and income elasticities are significant and close to previous household level studies

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

estimation of substitution possibilities between water and other production inputs the traditional approach to measuring the demand for water by industries relies upon fixed water use coefficients water supply planners base decisions about system expansion partly upon fixed coefficients applied to projected levels of industrial growth among the restrictive assumptions implied by this approach is that producers are generally unresponsive to the relative price of water compared with other factors earlier studies focused on industry by industry assessments of present and potential water use technologies and the possibilities for substituting other productive inputs for water most of these studies are economic engineering in form thompson and young and russell are analyses of the steam electric generating industry and the petroleum refining and petrochemical industry respectively because they used linear programming techniques their results must be interpreted cautiously the flexible functional forms which have become

examining the differences in self and publicly supplied firms water demands this research examines the fac tors influencing the decision made by manufac turing firms regarding their source of water sup ply and tests whether self supplied firms exhibit demands for intake water different from firms supplied by a public utility the first stage of the estimation model involves a probit analysis of the supply source choice and the second stage employs a regression model with endogenous switching to estimate the demand equations for the two types offirms results indicate that eco nomic factors such as annual connection fees influence the supply source decision jel q25

demand side management policies for residential water use who bears the conservation burden to assess the potential for urban demand side management dsm policies as a water resource management tool we analyze the extent to which price and alternative policy instruments such as use and quantity restrictions and subsidies for water efficient technologies reduce residential demand and their distributional implications by type of household using detailed household level panel data for two california communities the results suggest that the ultimate effects of dsm policies in terms of the reduction in aggregate demand and distribution of water savings among household classes depend both on the policy instrument selected and the composition of aggregate demand

price elasticity of groundwater demand attenuation and amplification bias due to incomplete information measurement errors in both human and natural components of agricultural and environmental systems can be as much a source of estimation bias as omitted variables selfselection simultaneity and reverse causality nonetheless partly because of difficulties in obtaining data there is less literature on measurement error problems than on other endogeneity problems this article examines estimation bias in the price elasticity of groundwater consumption for irrigated agriculture on the intensive margin the price at issue is for the energy used in pumping and pressurizing water for delivery lacking the precise unit irrigation cost previous studies imputed irrigation costs we first consider groundwater irrigation costs and identify factors that can cause measurement errors in the process of imputation under incomplete information about the determinants of irrigation costs we follow this by systematically analyzing the potential bias caused by measurement errors using econometric theory along with monte carlo simulations where appropriate we then quantify actual measurement errors making use of a unique dataset in which energy and groundwater consumption data are matched for individual observations finally we compare regression results using exact irrigation costs as opposed to imputed ones we find evidence of substantial measurement errors resulting in attenuation and amplification bias in the price elasticity of irrigation water consumption on the intensive margin our results indicate that measurement errors in irrigation costs can lead to misleading policy implications related to water and energy pricing as a tool to conserve water we also show that estimating the energy price elasticity of groundwater use is not as straightforward as previously thought

the welfare effects of third degree price discrimination with nonlinear demand functions the welfare effects of third degree price discrimination are analyzed when demand in one market is an additively shifted version of demand in the other market and both markets are served with uniform pricing social welfare is lower with discrimination if the slope of demand is log concave or the convexity of demand is nondecreasing in the price the demand functions commonly used in models of imperfect competition satisfy at least one of these sufficient conditions

modeling commercial demand for water exploring alternative prices instrumental variables and heterogeneity in this paper we introduce a previously unused instrumental variable to estimate the elasticity of commercial water demand for firms served by a large municipal utility we then present evidence that firms are more responsive to one period lagged average price than marginal price finally we find notable differences in elasticity among different categories of businesses the findings in this paper are particularly important as water utilities consider how to maintain revenue while coping with limited water supplies and increasing commercial demand

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

a discrete continuous choice approach to residential water demand under block rate pricing reply waldman is quite correct in noting that the microeconomic theory of block rate pricing in hewitt and hanemann hh 1995 is given for the general case of a k block rate structure whereas the econometric theory is largely confined to the case of exactly two blocks the extension in waldman to the more general case of k blocks is correct although the extension itself could be even more general if it addressed the nonnegativity of demand as is demonstrated below that no apparent attention was paid to the nonnegativity of demand in hh may be attributed to the fact that the need to do so was negated by a fortuitous assumption in the earlier work although that assumption that the errors are multiplicative and lognormally distributed was only maintained and not tested in hh i now estimate two models with the more common assumptions of linear demand and additive and normally distributed errors both with and without a modification for

price matching guarantees are price matching guarantees anticompetitive we examine the incentives for price matching guarantees in markets where information about prices is costly the conventional explanation of price matching as facilitating cartel pricing finds some theoretical support but our model provides an additional explanation a price matching guarantee may be a credible and easily understood means of communicating to uninformed consumers that a firm is low priced the credibility of the signal is assured by the behavior of informed consumers we contrast the testable implications of our model with those arising from two theories of price matching as anticompetitive and show that available evidence supports the signalling theory

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

third degree price discrimination quality choice and welfare abstract employing an endogenous quality choice model we reconsider the effect on welfare of monopolistic third degree price discrimination we prove that price discrimination always enhances welfare mainly because the quality improvement owing to price discrimination increases consumer surplus moreover we show that third degree price discrimination benefits all parties including consumers in the higher priced market if the preference differences between markets are sufficiently large

environmental regulation and sustainable competitiveness evaluating the role of firm level green investments in the context of the porter hypothesis we investigate the impact of environmental regulation on firm performance and investment behavior exploiting the case of a german water withdrawal regulation that is managed on the state level we analyze firms reactions to an increase in the water tax using a regression adjusted difference in differences approach we analyze the individual firm s response to a change in environmental regulation distinguishing between add on and integrated environmental investments this allows us to include innovation diffusion into our analysis which is likely to be of importance for increasing resource efficiency our results show that the regulation in question shows no sign of affecting firms overall competitiveness the results imply that the predicted negative impact of the regulation on firms economic performance that was brought up before the introduction of the tax does not seem to weigh heavily in this case nevertheless when placed into a sustainable competitiveness context the regulation considered does not qualify as an appropriate policy tool for fostering green growth

monopoly price discrimination and demand curvature this paper presents a general analysis of the eects of monopolistic third degree price discrimination on welfare and output when all markets are served su cient conditions involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the dierent mar kets are presented for discrimination to have negative or positive eects on

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

the law of demand positive sloping marginal revenue and multiple profit equilibria this paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized simple transformations of any well behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping for this reason positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed the existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility

bidding strategy of virtual power plant for participating in energy and spinning reserve markets part i problem formulation this paper addresses the bidding problem faced by a virtual power plant vpp in a joint market of energy and spinning reserve service the proposed bidding strategy is a non equilibrium model based on the deterministic price based unit commitment pbuc which takes the supply demand balancing constraint and security constraints of vpp itself into account the presented model creates a single operating profile from a composite of the parameters characterizing each distributed energy resources der which is a component of vpp and incorporates network constraints into its description of the capabilities of the portfolio the presented model is a nonlinear mixed integer programming with inter temporal constraints and solved by genetic algorithm ga

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

bounding the relative profitability of price discrimination we derive bounds on the ratio of a monopolist s profit from third degree price discrimination to that from uniform pricing if the monopolist serves n independent markets demand is continuous and the cost function is superadditive then the profit ratio is bounded by n a linear demand example is provided coming arbitrarily close to this bound we provide examples showing the profit ratio can be unboundedly large when marginal cost is decreasing demand is discontinuous or fixed cost is positive if the monopolist has access to certain demand rationing strategies under uniform pricing we can bound the profit ratio even for discontinuous demand functions and multiproduct cost functions

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

optimal offering and operating strategy for a large wind storage system as a price maker wind farms and energy storage systems are playing increasingly more important roles in power systems which makes their offering nonnegligible in some markets from the perspective of wind farm energy storage systems wf ess this paper proposes an integrated strategy of day ahead offering and real time operation policies to maximize their overall profit as participants with large capacity in electricity markets can influence cleared prices by strategic offering a large scaled wf ess is assumed to be a price maker in day ahead markets correspondingly the strategy considers influence of offering quantity on cleared day ahead prices and adopts linear decision rules as the real time control strategy these allow enhancing overall profits from both day ahead and balancing markets the integrated price maker strategy is formulated as a stochastic programming problem where uncertainty of wind power generation and balancing prices are taken into account in the form of scenario sets permitting to reformulate the optimization problem as a linear program case studies validate the effectiveness of the proposed strategy by highlighting and quantifying benefits comparing with the price taker strategy and also show the profit enhancement brought to the distributed resources

differential pricing when costs differ a welfare analysis this article analyzes the welfare effects of monopoly differential pricing in the important but largely neglected case where costs of service differ across consumer groups cost based differential pricing is shown to increase total welfare and consumer welfare relative to uniform pricing for broad classes of demand functions even when total output falls or the output allocation between consumers worsens we discuss why cost based differential pricing tends to be more beneficial for consumers than its demand based counterpart third degree price discrimination we also provide sufficient conditions for welfare improving differential pricing when costs and demands differ across consumer groups

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

differential pricing parallel trade and the incentive to invest abstract i consider the case for imposing uniform pricing on a monopolist in a setting where markets can be segmented according to differences in marginal costs and or consumer demand i also analyze the ex ante impact on incentives to invest in r d i show how two opposite trade offs arise when differential pricing is demand based uniform pricing has good ex post welfare properties but leads to lower investment ex ante conversely when differential pricing is cost based uniform pricing has bad ex post welfare properties but leads to higher investment ex ante

water reuse in brazilian manufacturing firms this article examines the factors influencing manufacturing firms water reuse decision and analyses whether the structure of intake water demand differs between firms that adopt water reuse practices and those which do not the first stage of the estimation model involves a probit analysis of the water reuse decision and the second stage employs an endogenous switching regression to estimate the intake water demand equations results suggest that water charges may act as an effective mechanism in inducing firms to undertake water reuse investments and in reducing intake water demand estimates of the water demand price elasticities indicate that plants that reuse water are more sensitive to water price increases than plants without access to reuse technologies

efficiency and equity in natural resources pricing a proposal for urban water distribution service this paper focuses on the design of optimal prices for urban water distribution service in this context pricing should be aimed at achieving efficiency equity financial aspects and or public acceptability and transparency the proposed tariffs are based on the theoretical frameworks suggested by ramsey 1927 and feldstein 1972 as a prior step estimations of urban water demands and water costs are carried out for the spanish municipality of seville finally an empirical comparison in welfare terms is conducted between the proposed tariffs and those applicable in the year 2000

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

evaluating the welfare effects of reforming municipal water prices abstract despite the strong criticisms by economists of water utility pricing practices and the presence of well articulated theoretical models of efficient pricing alternatives few empirical studies have documented the magnitude of the efficiency gains from altering water prices the structures of water supply costs and water demands are estimated using data from vancouver canada a simulation program uses these estimated relationships to compute the impact upon a representative water utility s output and deficit and upon aggregate consumer surplus of a move from its current practice to efficient prices simulation results show that a move to seasonally differentiated pricing with an annual charge calculated to recoup the resulting deficit raises aggregate surplus by approximately 4 this result contrasts with recent water pricing studies that found welfare improvements of approximately 1

estimating the structure of industrial water demands the case of canadian manufacturing this study considers water use by canadian manufacturing firms the estimation of water demands is based on a detailed cross sectional survey of establishment level observations on water prices quantities and expenditures industrial water use is modeled as having four components intake treatment prior to use recirculation and discharge average values for the estimated own price elasticity for water intake range from 0 1534 to 0 5885 water recirculation is found to be a substitute for both water intake and water discharge this confirms that expanding the use of economic incentives e g effluent fees may be effective in encouraging firms to reduce their water use while increasing in plant recirculation

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

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

an econometric estimation of industrial water demand in france this study investigates the structure of industrial water demand byestimating the derived demand for water on a sample of industrialestablishments located in the south west of france productiontechnologies are represented by short term variable cost functions andapproximated by a translog form industrial water use is modeled ashaving three components the quantity of water bought to a waterutility the quantity of autonomous water and the quantity of watertreated prior to use we include in this framework water effluents which are considered as a by product of the production process emittedby firms each of the three water components is treated as a separateinput and all are estimated as a system of simultaneous equations themodel is estimated on a sample of 51 industrial plants in the girondedistrict observed from 1994 to 1996 using seemingly unrelated regression sur and feasible generalized least squares fgls results ofestimations show that industrial firms are sensitive to water priceinputs network water elasticity is estimated at 0 29 it variesfrom 0 10 to 0 79 according to the type of industryconsidered autonomous water price elasticity is not significant elasticity for treated water is evaluated at 1 42 at themean sample and varies from 0 90 to 2 21 according to theindustry considered

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

issues in price discrimination a comment on and addendum to teaching price discrimination by carroll and coates there is a large variety of treatments of the topic of price discrimination in the most widely used undergraduate principles and intermediate microeconomic textbooks as well as industrial organization texts in a recent southern economic journal article carroll and coates 1999 set out to bring into focus the issues that ought to be discussed and made clear when teaching price discrimination to undergraduates their paper concludes with a list of six points that instructors should follow to spark students interest and create as little confusion as possible when covering the topic while in several ways their article is an improvement over many a textbook discussion i think their contribution can also be improved upon as it contains some misconceptions and mistakes specifically there are two concerns regarding the coverage of price discrimination in general and both of these affect the paper by carroll and coates in particular the first is mostly technical but has led to widespread misconceptions about the relationship between the price elasticity of demand and third degree price discrimination the other is mainly pedagogical and concerns what can or should actually be taken away from the classroom after a discussion of price discrimination especially regarding implications of price discrimination on economic efficiency

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

timing of investments and third degree price discrimination in intermediate good markets abstract this paper studies the discriminatory pricing of an intermediate good and compares two models with a different timing of investments undertaken by the downstream firms before or after the upstream monopolist sets the input prices when the more efficient downstream firm is charged a higher price than the less efficient firm in the first model in the second model when investments are made after input prices are set it may be charged a lower price due to the additional indirect effect of input prices on derived demands via the change of investment incentives it is illustrated that with linear market demand and quadratic investment cost whether a lower or higher price is charged to the more efficient firm depends on the ratio of the linear and quadratic coefficients in the cost function

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

strategic bidding for a virtual power plant in the day ahead and real time markets a price taker robust optimization approach we consider an energy management system that controls a cluster of price responsive demands besides these demands it also manages a wind power plant and an energy storage facility demands wind power plant and energy storage facility are interconnected within a small size electric energy system equipped with smart grid technology and constitute a virtual power plant that can strategically buy and sell energy in both the day ahead and the real time markets to this end we propose a two stage procedure based on robust optimization in the first stage the bidding strategy in the day ahead market is decided in the second stage and once the actual scheduling in the day ahead market is known we decide the bidding strategy in the real time market for each hour of the day we consider that the virtual power plant behaves as a price taker in these markets robust optimization is used to deal with uncertainties in wind power production and market prices which are represented through confidence bounds results of a realistic case study are provided to show the applicability of the proposed approach

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

analysing rationing policies drought and its effects on urban users welfare analysing rationing policies during drought the aim of this paper is to study the impact on consumers of rationing policies implemented during water shortages water scarcity gives rise to the need for rationing and various methods including supply cutoffs can be used a model is devised to quantify the welfare losses associated with qualitive and quantitive restrictions based on virtual prices and using the consumer surplus as a welfare measurement welfare variations for different users have been calculated to achieve the aim information relative to seville spain has been used analysing the drought period that took place in the first half of the 1990s it has been possible to observe the main source that led to welfare losses for each kind of user

evidence on the specification of price in the study of domestic water demand the development of lakefront property in northern wisconsin has prompted in several towns minimum frontage zoning stricter than the state standard such zoning generates an economic loss by constraining development development effect and an economic

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

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 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

a robust linear approach for offering strategy of a hybrid electric energy company this paper presents a new approach for determining the day ahead bidding strategies of a large scale hybrid electric energy company the company has both energy generation and energy retailing businesses in a competitive electricity market demand response programs are also considered in the retail side of the company in order to hedge the risk of participation in wholesale market this paper introduces a max min bilevel mathematical programming with equilibrium constraint model for offering a strategy that manages the risk of uncertain forecasted rivals bids by robust optimization the max min bilevel model is converted to its equivalent single level optimization using karush kuhn tucker optimality conditions the duality theory is utilized to find the equivalent ordinary maximization model of the max min problem strong duality theory and big m method are also used to linearize the final model of offering strategy applicability of the proposed approach is shown by implementing it on the ieee 118 bus test system

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

water conservation policy analysis an interregional multi output primal dual optimization approach an interregional multi output normalized restricted equilibrium model of field crop agriculture is estimated within the context of a multistage programming based system estimation procedure implicit total economic cost functions endogenize behavioral opportunity adjustment costs of fixed and allocatable land and water resources crop specific marshallian water demand elasticities are estimated for restricted and unrestricted groundwater substitution environments and decomposed by water source elasticities are inelastic but water price policy reform can be an effective water conservation policy tool when groundwater use is unrestricted when groundwater use is restricted effective conservation policy requires more dramatic water price policy reform

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