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Multi-Dimensional Price Discrimination

30 Pages Posted: 13 Jan 2012 Last revised: 21 Jul 2013

Qihong Liu

University of Oklahoma - Department of Economics

Jie Shuai

Zhongnan University of Economics and Law

Date Written: July 21, 2013

Abstract

We examine the profitability and welfare implications of price discrimination in a multi-dimensional model. First, when firms price discriminate on one and the same dimension, uniform price lies in between discriminatory prices and price discrimination raises profits relative to uniform pricing. This is in contrast to common findings in existing one-dimensional models featuring best-response asymmetry, suggesting that price discrimination can have qualitatively different implications in one- and multi-dimensional models. Second, price discrimination on one and the same dimension is the likely outcome when price discrimination decisions are endogenized using a two-stage discrimination-then-pricing game. Correspondingly, an observation of one-dimensional price discrimination in practice does not necessarily indicate that the underlying model should be one-dimensional.

Keywords: Multi-dimensional price discrimination, Best-response asymmetry, Information acquisition

JEL Classification: D43, L13, L40

Suggested Citation

Liu, Qihong and Shuai, Jie, Multi-Dimensional Price Discrimination (July 21, 2013). International Journal of Industrial Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1983996 or http://dx.doi.org/10.2139/ssrn.1983996

Qihong Liu (Contact Author)

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

Jie Shuai

Zhongnan University of Economics and Law ( email )

182 Nanhu Ave.
East Lake High-tech Development Zone
Wuhan, Hubei 430073
China

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