A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination |
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| Institution: | 1. Managing Economist, Bates White Economic Consulting, 2001 K Street NW, North Building, Suite 500, Washington, DC 20036, United States;2. Yale University and NBER, 195 Prospect Street, New Haven, CT 06511, United States;1. Department of Economics and IGIER, Bocconi University, Via Roentgen 1, 20136 Milano, Italy.;2. Department of Economics, Indiana University, 100 S Woodlawn Ave, Bloomington, IN 47405, USA.;1. Oslo Business School, Oslo Metropolitan University, Norway;2. Department of Economics, University of Oslo, Norway;1. Department of Management, Politecnico di Torino, Corso Duca degli Abruzzi 24 - 10129, Turin, Italy;2. Department of Economics, Social Studies, Applied Mathematics, and Statistics, University of Turin, Corso Unione Sovietica 218/bis - 10134, Turin, Italy;3. CEBRIG - Université Libre de Bruxelles; LABORatorio Riccardo Revelli, Belgium;1. Compass Lexecon, Spain;2. Graduate Institute of International and Development Studies, Geneva, CEPR and Compass Lexecon, Belgium;3. Bergamo University and Compass Lexecon, Italy |
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| Abstract: | This paper proposes a sufficient statistics approach to studying the welfare effects of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease social welfare simply entail a cross-market comparison of multiplications of such sufficient statistics as pass-through, conduct, and profit margin that are functions of first-order and second-order elasticities of the firm’s demand. Notably, these results are derived under a general class of market demand, and can be readily extended to accommodate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model. |
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