Input Price Discrimination When Buyers Operate in Multiple Markets

22 Pages Posted: 30 Dec 2010  

Anil Arya

Ohio State University (OSU) - Fisher College of Business

Brian Mittendorf

Ohio State University (OSU) - Fisher College of Business

Date Written: December 24, 2010

Abstract

This paper revisits third-degree price discrimination when input buyers serve multiple product markets. Such circumstances are prevalent since buyers often use the same input to produce different outputs, and even homogenous outputs are routinely sold through different locations. The typical view is that price discrimination stifles efficiency (and welfare) by resulting in price concessions to less efficient firms. When buyers serve multiple markets, price discrimination leads to price breaks for firms in markets with lower demand. When lower demand markets also have less competition, price discrimination can provide welfare gains by shifting output to less competitive markets.

Suggested Citation

Arya, Anil and Mittendorf, Brian, Input Price Discrimination When Buyers Operate in Multiple Markets (December 24, 2010). The Journal of Industrial Economics, Vol. 58, Issue 4, pp. 846-867, 2010. Available at SSRN: https://ssrn.com/abstract=1732399 or http://dx.doi.org/10.1111/j.1467-6451.2010.00440.x

Anil Arya

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Brian Mittendorf

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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