Price Discrimination and Investment Incentives

16 Pages Posted: 20 Mar 2011

See all articles by Alexei Alexandrov

Alexei Alexandrov

Amazon.com; Independent

Joyee Deb

Leonard N. Stern School of Business - Department of Economics

Date Written: March 6, 2011

Abstract

We examine a model of suppliers selling to two segments of consumers, who have different preferences for quality (or some product characteristic). We show that if the firm is unable to price discriminate between the segments, then there is less investment in quality. We find that both consumer segments, and the society overall, may suffer if the firms are unable to price discriminate. We extend the model to duopoly competition, and find that our results still hold.

Keywords: price discrimination, investment, parallel trade, pharmaceuticals, net neutrality

JEL Classification: F13, L42, L13, D92

Suggested Citation

Alexandrov, Alexei and Alexandrov, Alexei and Deb, Joyee, Price Discrimination and Investment Incentives (March 6, 2011). Simon School Working Paper No. FR 11-13, Available at SSRN: https://ssrn.com/abstract=1788769 or http://dx.doi.org/10.2139/ssrn.1788769

Alexei Alexandrov (Contact Author)

Amazon.com ( email )

Seattle, WA 98144
United States

Independent

Joyee Deb

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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