This article analyses the pricing policy equilibria emerging in a duopoly when one firmmay choose whether to engage in behaviour-based price discrimination or uniform pricing while the rival price discriminates. The question we address is: should a firm price discriminate when facing a price discriminating rival? Our main conclusion is that, if the consumers are sufficiently myopic, it is bette...

In the monopoly nonlinear pricing problem with unobservable consumer types, we study mechanisms in which the firm makes the set of consumer options conditional on the aggregate reports of consumer types it receives. Previous mechanisms that exploit knowledge of the true type distribution often have multiple equilibria or use noncredible contracts off the equilibrium path. When the monopolist ca...

Does banning price discrimination promote entry? The answer to this question has important public policy ramifications. Banning price discrimination would be beneficial to consumers if doing so always promoted competition. It seems that an incumbent who is serving multiple markets is likely to respond more aggressively to entry in any given market if price discrimination is allowed than if it i...

IN THE LITERATURE OF monopolistic third-degree price discrimination, it has been widely held that a change in aggregate Marshallian social welfare by price discrimination is negative if total output decreases. Among others, Schwartz [1990] verifies this conjecture for any total cost function that depends only on total output, not on its distribution among markets. Letting ∆X and ∆W denote a cha...

This paper tests various implications of quality-based price discrimination theory in the context of internet book retailers’ shipping menus. Many internet retailers create quality variants of a homogeneous good by bundling it with several shipping options that differ by delivery time. This practice can allow retailers to extract further surplus from consumers through quality-based price discri...

We analyze the welfare consequences of a monopolist having additional information about consumers’tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out "third degree price discrimination". We show that the segmentation and pricing induced by the additional information can achieve every combin...

We study intertemporal price discrimination when consumers can store for future consumption needs. To make the problem tractable we o¤er a simple model of demand dynamics, which we estimate using market level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who anticipate purchases for future consumption, and less p...

This paper studies third-degree price discrimination by transport facilities, such as airports and seaports, which sell access to the infrastructure as a necessary input for downstream production. These facilities are prone to congestion –which makes downstream markets interrelated– and their ownership structure is diverse, varying from public (domestic welfare maximizing) to private (profit ma...

Open access policies in telecommunications, including interconnection and unbundling, are implemented by regulators in an effort to increase competition in the sector. Lack of cooperation from incumbents is pervasive, given their incentives to engage in non-price discrimination and the moral hazard resulting from the inability of regulators to monitor the contract. We build a relationship betwe...