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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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1935-1682
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Volume 9, Issue 1 (Feb 2009)

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Third-Degree Price Discrimination with Buyer Power

Roman Inderst
  • 1University of Frankfurt and Imperial College London,
/ Tommaso Valletti
  • 2Imperial College London and University of Rome “Tor Vergata”,
Published Online: 2009-02-25 | DOI: https://doi.org/10.2202/1935-1682.2114

Abstract

This paper introduces a model of third-degree price discrimination where a seller's pricing power is constrained by buyers' outside options. Price uniformity performs more efficiently than discriminatory pricing, as uniform pricing allows weaker buyers to exploit the more attractive outside option of stronger buyers. This mechanism is markedly different from the mechanisms that are at work in case uniform pricing is imposed on an unconstrained monopolist.

Keywords: price discrimination; uniform pricing

About the article

Published Online: 2009-02-25


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2114. Export Citation

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