Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary

Chin-Sheng Chen () and Hong Hwang ()

Review of Industrial Organization, 2014, vol. 45, issue 2, 139-152

Abstract: This paper examines the welfare effect of third-degree price discrimination in a vertically related market with one upstream monopolist that sells its input to a continuum of downstream markets. Assume that the market boundary of the monopolist is endogenously determined. It is found that social welfare is necessarily lower under discriminatory than uniform pricing, even if the market area of the former is greater than that of the latter. This finding is contrary to that in the extant literature on price discrimination in final goods markets. Copyright Springer Science+Business Media New York 2014

Keywords: Endogenous market boundary; Input price discrimination; Spatial price discrimination; Third-degree price discrimination; D4; L1; R3 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:45:y:2014:i:2:p:139-152

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DOI: 10.1007/s11151-014-9432-1

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