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Spatial Pricing Policies Reconsidered: Monopoly Performance and Location
Author(s) -
Tan LinTi
Publication year - 2001
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/0022-4146.00234
Subject(s) - monopoly , economics , microeconomics , pricing schedule , average cost pricing , marginal cost , welfare , social welfare , variable pricing , nonlinear pricing , constant (computer programming) , rational pricing , econometrics , market economy , computer science , capital asset pricing model , programming language , political science , law
This paper reexamines the welfare implications of three pricing regimes (mill, uniform, and discriminatory) for a monopoly. Assuming linear demand and constant marginal costs, I show that with the introduction of endogenous location choice, uniform delivered pricing may provide the highest social welfare when demands in different markets are sufficiently heterogeneous; whereas discriminatory pricing always dominates uniform pricing when demands in different markets are similar.