‪Nonlinear pricing without market power; what could be learned from the contestable markets approach?‪

Eduardo Brou

Revue d'économie industrielle, 2018, vol. n° 161, issue 1, 39-66

Abstract: ?According to economic theory, the implementation of price discrimination by a firm requires market power. However, observation of reality, confirmed by empirical studies, shows that in extremely competitive industries the practice of price discrimination is verified, especially its second-degree variant. This article explains theoretically the sustainability of second-degree price discrimination in perfectly contestable markets (a generalization of the notion of perfectly competitive markets), thus explaining an empirical phenomenon not authorized by economic theory. Nonlinear pricing systems emerge as mechanisms that, in competitive environments, and without centralization of information, will allow greater social efficiency.?

Keywords: nonlinear pricing; contestable markets; increasing returns to scale; asymmetric information (search for similar items in EconPapers)
Date: 2018
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