Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary

Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary This paper examines the welfare effect of third-degree price discrimination in a vertically related market with one upstream monopolist that sells its input to a continuum of downstream markets. Assume that the market boundary of the monopolist is endogenously determined. It is found that social welfare is necessarily lower under discriminatory than uniform pricing, even if the market area of the former is greater than that of the latter. This finding is contrary to that in the extant literature on price discrimination in final goods markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary

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Publisher
Springer Journals
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-014-9432-1
Publisher site
See Article on Publisher Site

Abstract

This paper examines the welfare effect of third-degree price discrimination in a vertically related market with one upstream monopolist that sells its input to a continuum of downstream markets. Assume that the market boundary of the monopolist is endogenously determined. It is found that social welfare is necessarily lower under discriminatory than uniform pricing, even if the market area of the former is greater than that of the latter. This finding is contrary to that in the extant literature on price discrimination in final goods markets.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Aug 3, 2014

References

  • Input price discrimination when buyers operate in multiple markets
    Arya, A; Mittendorf, B

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