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A Note on Third Degree Price Discrimination in Intermediate Good Markets
Author(s) -
Li Youping
Publication year - 2014
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/joie.12057
Subject(s) - economics , price elasticity of demand , price discrimination , demand curve , microeconomics , degree (music) , elasticity (physics) , econometrics , function (biology) , constant (computer programming) , computer science , materials science , acoustics , composite material , biology , programming language , physics , evolutionary biology
This note studies third degree price discrimination in intermediate good markets. I show that whether a more efficient downstream firm is charged a higher or lower price than a less efficient firm depends on the shape of the demand function. Different from the case in which final market demand is linear, the usual assumption in the literature, constant elasticity demand, for example, results in a more efficient firm's receiving a discount.