I am grateful to Igal Hendel, Katy Graddy, Tom Holmes, David Myatt, John Thanassoulis, John Vickers and two anonymous referees for helpful comments on earlier versions of this paper.
The welfare effects of third-degree price discrimination with nonlinear demand functions
Article first published online: 28 JUN 2008
The RAND Journal of Economics
Volume 38, Issue 2, pages 419–428, June 2007
How to Cite
Cowan, S. (2007), The welfare effects of third-degree price discrimination with nonlinear demand functions. The RAND Journal of Economics, 38: 419–428. doi: 10.1111/j.1756-2171.2007.tb00075.x
- Issue published online: 16 SEP 2008
- Article first published online: 28 JUN 2008
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.