Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary
Journal
Review of Industrial Organization
Journal Volume
45
Journal Issue
2
Pages
139-152
Date Issued
2014
Author(s)
Chen, Chin-Sheng
Abstract
This paper examines the welfare effect of third-degree price discrimination in a vertically related market with one upstream monopolist that sells its input to a continuum of downstream markets. Assume that the market boundary of the monopolist is endogenously determined. It is found that social welfare is necessarily lower under discriminatory than uniform pricing, even if the market area of the former is greater than that of the latter. This finding is contrary to that in the extant literature on price discrimination in final goods markets. © 2014 Springer Science+Business Media New York.
SDGs
Type
journal article