A Sufficient Statistics Approach for Welfare Analysis of Oligopolistic Third-Degree Price Discrimination

63 Pages Posted: 24 Jul 2017 Last revised: 25 Jan 2022

See all articles by Takanori Adachi

Takanori Adachi

Kyoto University - Graduate School of Management; Kyoto University - Graduate School of Economics

Date Written: January 25, 2022

Abstract

This paper proposes a sufficient statistics approach to welfare analysis of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease aggregate output, social welfare, and consumer surplus simply entail a cross-market comparison of multiplications of two or three of the sufficient statistics--pass-through, conduct, and profit margin--that are functions of first-order and second-order elasticities of the firm's demand. Notably, these results are derived under a general class of demand, and can be readily be extended to accommodate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model.

Keywords: Third-Degree Price Discrimination, Oligopoly, Sufficient Statistics

JEL Classification: D21, D43, D60, L11, L13

Suggested Citation

Adachi, Takanori, A Sufficient Statistics Approach for Welfare Analysis of Oligopolistic Third-Degree Price Discrimination (January 25, 2022). Available at SSRN: https://ssrn.com/abstract=3006421 or http://dx.doi.org/10.2139/ssrn.3006421

Takanori Adachi (Contact Author)

Kyoto University - Graduate School of Management ( email )

36-1 Yoshida-honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

Kyoto University - Graduate School of Economics ( email )

36-1 Yoshida-honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

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