Third-degree price discrimination, quality choice, and welfare
Employing an endogenous quality choice model, we reconsider the effect on welfare of monopolistic third-degree price discrimination. We prove that price discrimination always enhances welfare, mainly because the quality improvement owing to price discrimination increases consumer surplus. Moreover, we show that third-degree price discrimination benefits all parties, including consumers in the higher priced market if the preference differences between markets are sufficiently large.
Year of publication: |
2010
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---|---|
Authors: | Ikeda, Takeshi ; Toshimitsu, Tsuyoshi |
Published in: |
Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 106.2010, 1, p. 54-56
|
Publisher: |
Elsevier |
Keywords: | Third-degree price discrimination Endogenous quality choice Vertically differentiated products Monopoly |
Saved in:
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