Third-degree price discrimination revisited

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The author derives the probability that price discrimination improves social welfare, using a simple model of third-degree price discrimination assuming two independent linear demands. The probability that price discrimination raises social welfare increases as the preferences or incomes of consumer groups become more heterogeneous. He derives the average revenue curve of the price-discriminating monopoly, corresponding to its aggregated marginal revenue curve. The curve is non-linear and lies above the aggregated demand curve of simple monopoly. The results may be used to explain to students the effects of third-degree price discrimination on market outcomes.
Publisher
HELDREF PUBLICATIONS
Issue Date
2006
Language
English
Article Type
Article
Keywords

MONOPOLY OUTPUT; WELFARE

Citation

JOURNAL OF ECONOMIC EDUCATION, v.37, no.1, pp.83 - 92

ISSN
0022-0485
DOI
10.3200/JECE.37.1.83-92
URI
http://hdl.handle.net/10203/250824
Appears in Collection
MG-Journal Papers(저널논문)
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