Market Foreclosure and the Welfare Impacts of Price Discrimination

Qihong Liu ()

Economics Bulletin, 2016, vol. 36, issue 1, 337-348

Abstract: There is an extensive literature studying the welfare comparison of third-degree price discrimination vs. uniform pricing, typically under the assumption that all markets are served under uniform pricing. In this study, we allow market foreclosure and show that the welfare comparison of price discrimination vs. uniform pricing depends on whether market foreclosure is allowed. We also analyze how firms' foreclosure incentives vary with competition intensity. Our results show that an increase in competition intensity makes complete foreclosure less likely to be an equilibrium. On the other hand, the impact of competition intensity on partial foreclosure is non-monotonic. We also show that equilibrium under uniform pricing may feature strategic market foreclosure, defined as committing not to serve a market when demand there is positive.

Keywords: Price discrimination; Market foreclosure; Strategic market foreclosure. (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2016-03-17
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I1-P34.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-15-00761

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().