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Third‐Degree Price Discrimination With Interdependent Demands[Note 1. The author wishes to thank David Malueg, Severin Borenstein, ...]
Author(s) -
Layson Stephen K.
Publication year - 1998
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00085
Subject(s) - degree (music) , interdependence , price discrimination , economics , microeconomics , sociology , social science , physics , acoustics
This paper analyzes the price, output, and welfare effects of third‐degree price discrimination for a monopolist who sells in two interdependent markets. The case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes. The economic effects of price discrimination are shown to depend on the type and strength of demand interdependence, the curvature of the demands and the slope of marginal cost. The circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed.