Second-Degree Price Discrimination: A Graphical Approach to Welfare Applications
15 Pages Posted: 12 Apr 2006
Date Written: February 2006
This paper uses a simple diagram to compare two pricing strategies: price-quantity packages, and a two-part tariff from the monopoly and from the welfare points of view. It is shown that in the two-type consumer case when the monopoly is concerned, the price-quantity packages strategy dominates two-part tariff pricing. However, the welfare may be higher under two-part tariff pricing, which cases are profiled.
Keywords: Second-degree price discrimination, welfare
JEL Classification: A22, D42, D6, L12
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