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Third-Degree Price Discrimination in Oligopoly When Markets are Covered

Authors: Dertwinkel-Kalt, M.; Wey, C.;

Third-Degree Price Discrimination in Oligopoly When Markets are Covered

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

Harmonic Mean Formula, Third-Degree Price Discrimination, L13, ddc:330, L41, Uniform Pricing, K21, third-degree price discrimination, Market Integration, Covered Demand, market integration, Oligopolistic Competition, oligopolistic competition, D43

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
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bronze