Price Discrimination in the Market for Corporate Law
53 Pages Posted: 25 Sep 2000
This Article analyzes how Delaware uses its market power in the market for incorporations to increase its profits through price discrimination. Price discrimination entails charging different prices to different consumers according to their willingness to pay. Two features of Delaware law constitute price discrimination. First, Delaware's uniquely structured franchise-tax schedule assesses a higher tax to public than to nonpublic firms. Second, Delaware's litigation-intensive corporate law effectively price discriminates among firms according to the level of their involvement in corporate disputes. From the perspective of social welfare, tax discrimination is likely to enhance efficiency. By contrast, price discrimination through litigation-intensive corporate law is likely to reduce efficiency.
JEL Classification: L10
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