Can Banning Spatial Price Discrimination Improve Social Welfare?
Ziying Yang () and
Felix Munoz-Garcia ()
Additional contact information
Ziying Yang: Southwestern University of Finance and Economics
Journal of Industry, Competition and Trade, 2018, vol. 18, issue 2, 223-243
Abstract We analyze a two-stage sequential-move model of location and pricing to identify firm’s location, output, and welfare. We consider two pricing regimes (mill pricing and spatial price discrimination) and, unlike previous literature, allow in each of them for a non-uniform population density, non-constant location costs (i.e., the setup costs, such rental costs and land prices, differ by firm’s location), and endogenous market boundaries. Under constant location costs, our results show the firm locates at the city center under both mill and discriminatory pricing, and that output is larger under spatial price discrimination. Welfare comparisons are, however, ambiguous. Under non-constant location costs, we find the optimal location can move away from the city center, and does not coincide across pricing regimes. Compared with mill pricing, spatial price discrimination generates a higher level of output. We also find that welfare is higher (lower) under mill than under discriminatory pricing when transportation rates are low (high, respectively).
Keywords: Monopoly spatial price discrimination; Non-uniform distribution; Location choice; Social welfare; Mill pricing; Non-constant location costs (search for similar items in EconPapers)
JEL-codes: D42 D60 L12 L50 R32 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10842-017-0263-2 Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:18:y:2018:i:2:d:10.1007_s10842-017-0263-2
Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2
Access Statistics for this article
Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder
More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla ().