Price Discrimination with Costly Consumer Arbitrage

Simon Anderson and Victor Ginsburgh

No 1994039, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Consumer arbitrage affects discriminatory pricing across markets in several ways. If all consumers face the same arbitrage costs, a monopolist's profit increases with arbitrage costs, and overall welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second market even if there is no local demand - it can use the second market to discriminate across consumers in the first market on the basis of their costs. When there is also local demand in the second market, welfare may be increasing in arbitrage costs, even if output falls.

JEL-codes: D42 D45 L41 L43 (search for similar items in EconPapers)
Date: 1994-08-01
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