Download this Paper Open PDF in Browser

A Note on Second-Degree Price Discrimination: The Optimal Quantity-Discount Pricing Schedule

9 Pages Posted: 15 Apr 2016  

Winston W. Chang

State University of New York at Buffalo - Department of Economics

Tai-Liang Chen

Independent

Date Written: April 9, 2016

Abstract

This paper examines a monopolist's optimal multi-tier quantity-discount pricing scheme. In the linear demand case, it derives a new formula for determining the optimal total output for any number of tiers. The formula yields a convenient graphical representation of the optimal pricing scheme. The paper shows that all tiers' outputs are equal, the last tier's price is always higher than the marginal cost, and the larger is the number of tiers, the larger are the total output, profits, and social welfare but the lower is the consumer surplus. In the non-linear demand case, the paper shows how the individual tier's output structure is affected by the curvature of the demand curve.

Suggested Citation

Chang, Winston W. and Chen, Tai-Liang, A Note on Second-Degree Price Discrimination: The Optimal Quantity-Discount Pricing Schedule (April 9, 2016). Available at SSRN: https://ssrn.com/abstract=2761904 or http://dx.doi.org/10.2139/ssrn.2761904

Winston W. Chang (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

453 Fronczak Hall
Department of Economics, SUNY at Buffalo
Buffalo, NY 14260
United States
716-645-8671 (Phone)
716-645-2127 (Fax)

HOME PAGE: http://economics.buffalo.edu/facultyprofiles/winston-chang/

Tai-Liang Chen

Independent ( email )

No Address Available

Paper statistics

Downloads
54
Rank
319,321
Abstract Views
227