Departmental Bulletin Paper Output and Welfare Implications of Oligopolistic Third-Degree Price Discrimination

Adachi, Takanori  ,  Fabinger, Michal

(E17-5) 2017-08 , 名古屋大学大学院経済学研究科附属国際経済政策研究センター
Description
Using estimable concepts, we provide suffcient conditions for price discrimination to lower or raise aggregate output and social welfare under symmetrically differentiated oligopoly with general demand functions and cost differences across separated markets. Assuming that all markets are open under uniform pricing, we show that if the markup ratio in the strong market (where the discriminatory price is higher than the uniform price) relative to the weak market (where it is lower) is sufficiently large under uniform pricing, then social welfare will be lower if price discrimination is allowed. It is also shown that if either the conduct ratio, the pass-through ratio, or the markup ratio is suffciently small in the strong market under price discrimination, then it raises social welfare.
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