Constructing a simple model that includes the price of education, this paper shows that the educational expenditure of rich households could prevent poor households from escaping poverty. The paper offers an explanation for persistent inequality.

Even if the relatively rich and the poor are initially caught in a poverty trap, the relatively rich can escape poverty by receiving payments from the poor. Further accumulation of wealth by the rich allows the poor to escape poverty.

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....