The Cost Effect in Third-Degree Price Discrimination
Authors
Pedro Mendi
Markus Kinateder
Francisco Galera
Type
Article
Publisher
Journal of Economics Vol.113 No.2
Pages
175-186
Date
01-10-2014

In the presence of a non-constant marginal cost and demand uncertainty, we show that an output increase is no longer a necessary condition for welfare to increase following the introduction of third-degree price discrimination. We thus highlight the existence of an effect that might offset the well known output and misallocation effects of price discrimination. We propose a specific example where this is indeed the case.

Journal of Economics, 113: 175-186.