22 Pages Posted: 30 Dec 2010
Date Written: December 24, 2010
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: 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
By Martin Cave
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