Partial price discrimination by an upstream monopolist
- Lluís Bru 1
- Ramon Faulí-Oller 2
- Joel Sandonís 2
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1
Universitat de les Illes Balears
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2
Universitat d'Alacant
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ISSN: 1869-4195
Year of publication: 2011
Volume: 2
Issue: 2
Pages: 217-231
Type: Article
More publications in: SERIEs : Journal of the Spanish Economic Association
Abstract
We analyze third degree price discrimination by an upstream monopolist to a continuum of heterogeneous downstream firms. The novelty of our approach is to recognize that customizing prices may be costly. As a consequence, partial price discrimination arises in equilibrium; in particular, we show that inefficient downstream firms receive personalized prices whereas efficient firms are charged a uniform price. The extreme cases of complete price discrimination and uniform price arise in our setting as particular cases, depending on the cost of customizing prices.