Market Foreclosure, Output and Welfare Under Second-Degree Price Discrimination

Economics Bulletin, Forthcoming

14 Pages Posted: 21 Dec 2018

See all articles by Yong Chao

Yong Chao

University of Louisville - College of Business - Department of Economics

Babu Nahata

University of Louisville - College of Business - Department of Economics

Date Written: November 28, 2018

Abstract

We compare second-degree price discrimination with uniform pricing using two linear demands. Our comparison shows that second-degree price discrimination can result in a welfare-enhancing market foreclosure (both markets are served under uniform pricing but one of them is excluded under second-degree price discrimination) because the resulting foreclosure can increase both the total output and the total surplus. The total surplus under second-degree price discrimination could also be lower without the foreclosure. We also contrast our results with well-known results under third-degree price discrimination.

Keywords: market foreclosure, welfare effects, second-degree price discrimination

JEL Classification: D42, D61, L11

Suggested Citation

Chao, Yong and Nahata, Babu, Market Foreclosure, Output and Welfare Under Second-Degree Price Discrimination (November 28, 2018). Economics Bulletin, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3295328

Yong Chao (Contact Author)

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States
(502)852-3573 (Phone)
(502)852-7672 (Fax)

HOME PAGE: http://yongchao.us

Babu Nahata

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States
502-852-4864 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
75
PlumX Metrics