Third‐Degree Price Discrimination in the Presence of Subsidies

Stefan Felder

German Economic Review, 2006, vol. 7, issue 4, 419-426

Abstract: Abstract. According to a classical result, a move from uniform pricing to third‐degree price discrimination only improves welfare if total output increases. In this paper I show that the classical result fails in the presence of subsidies. This finding appears to be relevant for the pharmaceutical sector where a consumer pays a fraction of the actual drug price due to health insurance coverage.

Date: 2006
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https://doi.org/10.1111/j.1468-0475.2006.00127.x

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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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