Detalle Publicación


Quality differences, third-degree price discrimination, and welfare

Título de la revista: ECONOMIC INQUIRY
ISSN: 0095-2583
Volumen: 55
Número: 1
Páginas: 339 - 351
Fecha de publicación: 2017
We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher-quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare-decreasing. If they differ, discrimination is welfare-increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)