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The welfare effects of third‐degree price discrimination with nonlinear demand functions
Author(s) -
Cowan Simon
Publication year - 2007
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2007.tb00075.x
Subject(s) - economics , price discrimination , imperfect competition , welfare , convexity , microeconomics , degree (music) , nonlinear pricing , demand curve , competition (biology) , inverse demand function , imperfect , social welfare , perfect competition , econometrics , market economy , financial economics , physics , acoustics , law , political science , biology , ecology , linguistics , philosophy
The welfare effects of third‐degree price discrimination are analyzed when demand in one market is an additively shifted version of demand in the other market and both markets are served with uniform pricing. Social welfare is lower with discrimination if the slope of demand is log concave or the convexity of demand is nondecreasing in the price. The demand functions commonly used in models of imperfect competition satisfy at least one of these sufficient conditions.