Input Price Discrimination with Downstream Cournot Competitors

22 Pages Posted: 1 Nov 2002

See all articles by Tommaso M. Valletti

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: October 2002

Abstract

This Paper addresses the question of third-degree price discrimination in input markets. I propose a solution that relies on a method that decomposes the upstream monopolist's profit into two parts, one that depends on average input prices, and one that depends on their distribution. I am able to obtain rather general results, and, in the linear demand case, I obtain a full characterization of the equilibria in the two regimes of price discrimination and price uniformity, generalizing the findings of Yoshida (2000). Under reasonable assumptions, input price discrimination negatively affects both consumer surplus and total welfare.

Keywords: input price discrimination

JEL Classification: L42

Suggested Citation

Valletti, Tommaso M., Input Price Discrimination with Downstream Cournot Competitors (October 2002). CEPR Discussion Paper No. 3570. Available at SSRN: https://ssrn.com/abstract=347462

Tommaso M. Valletti (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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