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Third Degree Price Discrimination in Linear-Demand Markets: Effects on Number of Markets Served and Social Welfare.

We analyze the welfare impact of monopolistic third degree price discrimination when all markets are not necessarily served by uniform pricing. We consider n markets with linear demand curves. Each demand is characterized by the price intercept of the demand curve and by the size of the market, as m...

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Published in:Southern Economic Journal Vol. 75; no. 2; pp. 558 - 574
Main Authors: Kaftal, Victor, Pal, Debashis
Format: Article
Published: Wiley-Blackwell Oct2008
Subjects:
Economic policy
Economic demand
Restraint of trade
Pricing
Price discrimination
Price maintenance
Price regulation
Demand function
Marketing strategy
Online Access:View this record in EBSCOhost
Summary:We analyze the welfare impact of monopolistic third degree price discrimination when all markets are not necessarily served by uniform pricing. We consider n markets with linear demand curves. Each demand is characterized by the price intercept of the demand curve and by the size of the market, as measured by the area under the demand curve. Based on these two exogenous parameters, we establish the necessary and sufficient conditions to determine the number of markets to be served under uniform pricing and the direction of the welfare change under third degree price discrimination.