The welfare effect of regional price discrimination

Gihwan Yi

Journal of Asian Economics, 2025, vol. 100, issue C

Abstract: This study investigates the welfare effect of permitting regional price discrimination. Using demand and cost estimates from the Korean soju market, this study simulates counterfactual outcomes under regional price discrimination and compares them with observed outcomes under uniform pricing. The empirical results indicate that price discrimination tends to intensify price competition across most regions. The welfare trade-off is observed in consumer surplus across regions and in profit across manufacturers. Consumers are likely to be better off in all regions except Seoul, Gyunggi, and Gangwon. National manufacturers, Jinro and Lotte, increase their profits by expanding market shares in non-home regions. The government may expect a national welfare gain from price discrimination consequent to the gain from consumer surplus.

Keywords: ad valorem tax; Multi-regional oligopoly firm; Competition law; Price discrimination (search for similar items in EconPapers)
JEL-codes: D22 H22 L66 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001162

DOI: 10.1016/j.asieco.2025.101992

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