The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly

Takanori Adachi and Noriaki Matsushima

No 800, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper studies the welfare effects of third-degree price discrimination under oligopolistic competition with horizontal product differentiation. We derive a necessary and sufficient condition for price discrimination to improve social welfare: the degree of substitution must be sufficiently greater in the "strong" market (where the discriminatory price is higher than the uniform price) than in the "weak" market (where it is lower). It is verified, however, that consumer surplus is never improved; social welfare improves solely due to an increase in the firms' profits.

Keywords: Third-degree price discrimination; Oligopoly; Social welfare; Horizontal product differentiation; Substitutability; Complementarity (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: THE WELFARE EFFECTS OF THIRD-DEGREE PRICE DISCRIMINATION IN A DIFFERENTIATED OLIGOPOLY (2014)
Working Paper: The Welfare Effects of Third-Degree Price Discrimination in a Differentiated Oligopoly (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:800

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