Free entry and welfare with price discrimination

Francisco Galera () and Pedro Mendi
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Francisco Galera: Universidad de Navarra

Economics Bulletin, 2011, vol. 31, issue 4, 3268-3274

Abstract: We show that if firms in an industry engage in third-degree price discrimination, the number of firms in the free-entry equilibrium may be inefficiently low. This result is obtained even with set up costs and a price above marginal cost. We discuss the relevant implications that our result has for policy design.

Keywords: Free entry; Social welfare; Third-degree price discrimination; Oligopoly; Business stealing. (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2011-12-05
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