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Imperfect Price Discrimination, Market Structure and Efficiency

18 Pages Posted: 8 Nov 2004  

Qihong Liu

University of Oklahoma - Department of Economics

Konstantinos Serfes

Drexel University - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2005

Abstract

We introduce a flexible framework by modeling the information firms possess about consumers' locations (preferences) on the Salop circle as a partition. Higher information quality is translated into a partition refinement. In the limit, we obtain the perfect price discrimination paradigm. We show that the free-entry equilibrium number of firms exhibits a U-shape as a function of the quality of information. This implies that some (but not too much) price discrimination yields the most efficient non-cooperative outcome.

Keywords: Free-entry, Price discrimination, Market structure, Efficiency

JEL Classification: D43, L11, L43

Suggested Citation

Liu, Qihong and Serfes, Konstantinos, Imperfect Price Discrimination, Market Structure and Efficiency (January 14, 2005). Available at SSRN: https://ssrn.com/abstract=613023 or http://dx.doi.org/10.2139/ssrn.613023

Qihong Liu (Contact Author)

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

Konstantinos Serfes

Drexel University - School of Economics ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States
215-895-6816 (Phone)
215-571-4670 (Fax)

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