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Measuring market power when firms price discriminate

Levent Kutlu and Robin Sickles

Empirical Economics, 2017, vol. 53, issue 1, No 17, 287-305

Abstract: Abstract We propose conduct parameter-based market power measures within a model of price discrimination, extending work by Hazledine (Econ Lett 93:413–420, 2006) and Kutlu (Econ Lett 117:540–543, 2012) to certain forms of second-degree price discrimination. We use our model to estimate the market power of US airlines in a price discrimination environment. We find that a slightly modified version of our original theoretical measure is positively related to market concentration. Moreover, on average, market power for high-end segment is greater than that of low-end segment.

Keywords: Price discrimination; Market power; Conduct parameter (search for similar items in EconPapers)
JEL-codes: L13 L40 L93 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s00181-017-1251-4

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