Input Price Discrimination and Allocation Efficiency

Chin-Sheng Chen ()
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Chin-Sheng Chen: Soochow University

Review of Industrial Organization, 2022, vol. 60, issue 1, No 4, 93-107

Abstract: Abstract This research examines the effects of input price discrimination on allocation efficiency and social welfare. Instead of assuming constant marginal costs, we allow downstream firms to produce under increasing marginal costs. When downstream firms operate in separate markets, even though total output remains unchanged, consumer surplus and social welfare could be greater under discriminatory pricing than under uniform pricing. Moreover, the social desirability of input price discrimination can still hold true when downstream firms compete either in Cournot or Bertrand fashion.

Keywords: Input price discrimination; Diminishing-marginal-return technology; Increasing marginal cost; Welfare (search for similar items in EconPapers)
JEL-codes: D42 L13 L43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11151-021-09830-1

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