Competitive differential pricing
Yongmin Chen (),
Jianpei Li and
MPRA Paper from University Library of Munich, Germany
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)
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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https://mpra.ub.uni-muenchen.de/94381/1/MPRA_paper_94381.pdf original version (application/pdf)
Working Paper: Competitive Differential Pricing (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:94381
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