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Competitive differential pricing

Yongmin Chen (), Jianpei Li and Marius Schwartz

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes welfare under differential versus uniform pricing across oligopoly markets that differ in costs of service. We establish necessary and sufficient conditions on demand properties---cross/own elasticities and curvature---for differential pricing by symmetric firms to raise aggregate consumer surplus, profit, and total welfare. The analysis reveals intuitively why differential pricing is generally beneficial though not always---including why profit can fall, unlike for monopoly---and why it is more beneficial than oligopoly third-degree price discrimination. When firms have asymmetric costs, however, differential pricing can reduce profit or consumer surplus even with `simple' demands such as linear.

Keywords: differential pricing; price discrimination; demand curvature; cross-price elasticity; pass-through; oligopoly (search for similar items in EconPapers)
JEL-codes: D4 D43 L1 L11 L13 L4 (search for similar items in EconPapers)
Date: 2019-05-11
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Related works:
Working Paper: Competitive Differential Pricing (2017) Downloads
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