Third-Degree Price Discrimination in Oligopoly When Markets Are Covered

Markus Dertwinkel-Kalt () and Christian Wey

VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association

Abstract: We analyze oligopolistic third-degree price discrimination relative to uniform pricing when markets are always covered. Pricing equilibria are critically determined by supply-side features such as the number of firms and their marginal cost differences. It follows that each firm's Lerner index under uniform pricing is equal to the weighted harmonic mean of the firm's relative margins under discriminatory pricing. Uniform pricing then decreases average prices and raises consumer surplus. We provide an intriguingly simple approach to calculate the gain in consumer surplus and loss in firms' profits from uniform pricing only based on market data of the discriminatory equilibrium (prices and quantities).

Keywords: Third-Degree Price Discrimination; Oligopolistic Competition; Market Integration (search for similar items in EconPapers)
JEL-codes: D43 K21 L13 L41 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cwa, nep-gth, nep-mic and nep-reg
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https://www.econstor.eu/bitstream/10419/242336/1/vfs-2021-pid-48402.pdf (application/pdf)

Related works:
Journal Article: Third‐Degree Price Discrimination in Oligopoly when Markets are Covered (2023)
Working Paper: Third-Degree Price Discrimination in Oligopoly When Markets Are Covered (2020)
Working Paper: Third-degree price discrimination in oligopoly when markets are covered (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc21:242336

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