Economics at your fingertips  

A Note on Pricing With Market Power: Third-Degree Price Discrimination With Quality-Differentiated Demand

Charles F. Adams

The American Economist, 2019, vol. 64, issue 2, 183-187

Abstract: The article points up limitations in the standard undergraduate treatment of third-degree price discrimination by monopolists. While such treatments allude to qualitative distinctions between higher and lower priced alternatives, failure to capture those distinctions in underlying cost and demand structures results in only partial and possibly misleading conclusions about the nature and consequences of such discrimination. Deriving quality-differentiated linear demand and cost structures from the constructs underlying undergraduate microeconomics, the article compares the standard analysis of price discrimination with one that explicitly accounts for quality choices and monopoly power in manipulating those choices. The analysis illustrates the potential for substantially greater monopoly profits and greater efficiency losses by forcing some groups of consumers into suboptimal quality choices once quality variations are explicitly accounted for. JEL Classifications: A1, A22, D11, D21, D42

Keywords: third-degree price discrimination; quality differentiation; monopoly (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1177/0569434519835777

Access Statistics for this article

More articles in The American Economist from Sage Publications
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2020-06-17
Handle: RePEc:sae:amerec:v:64:y:2019:i:2:p:183-187