The Elimination of Price Discrimination and Strategic Incentive of R&D

Sang-Ho Lee ()

Korean Economic Review, 1999, vol. 15, 199-212

Abstract: This article investigates the welfare consequences of the elimination of price discrimination and points out the firm's strategic incentive of R&D against the regulator. It is shown that discrimination regulation aimed at preventing welfare-reducing price discrimination may induce the monopolist to invest a lower R&D and make the final outcome that is socially suboptimal compared to the case of no regulation. This article also discusses the second-best way of achieving an efficient regulatory policy by considering the firm's opportunistic behaviors and the regulator's possibility of commitment.

Keywords: Third-degree Price Discrimination; Strategic R&D Incentives (search for similar items in EconPapers)
JEL-codes: D42 L12 L4 (search for similar items in EconPapers)
Date: 1999
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