Price Discrimination in a Rent-Seeking Economy

Francis K Cheung and X. Wang ()

Public Choice, 1996, vol. 86, issue 1-2, 103-16

Abstract: This paper examines the incentive and the consequences of using discriminatory pricing by a monopolist in a rent-seeking economy. It is shown that, even if all consumer groups' demands have identical elasticities at any given price, the monopolist has an incentive to charge a lower price to high-pressure consumer groups so as to alleviate their rent-seeking efforts in challenging its monopolistic power. Furthermore, it is shown that, by allowing the firm to price discriminate, total welfare may increase even if all rent-seeking expenditures are completely wasteful. Copyright 1996 by Kluwer Academic Publishers

Date: 1996
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