Price discrimination and investment incentives

We examine a model of a monopolist selling to two segments of consumers with different preferences for quality. We show that if the firm is unable to price discriminate between the segments, then there is less investment in quality. We find that both consumer segments, and society overall, may suffer if the firm is unable to price discriminate. We extend the model to duopoly competition, and find that our results still hold.

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Year of publication:	2012
Authors:	Alexandrov, Alexei ; Deb, Joyee
Published in:	International Journal of Industrial Organization. - Elsevier, ISSN 0167-7187. - Vol. 30.2012, 6, p. 615-623
Publisher:	Elsevier
Subject:	price discrimination \| investment \| parallel trade \| pharmaceuticals \| net neutrality

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Type of publication:	Article
Classification:	F13 - Commercial Policy; Protection; Promotion; Trade Negotiations ; L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts ; L13 - Oligopoly and Other Imperfect Markets ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010594868