Price Discrimination

Procurement regulation aimed at curbing discrimination requires equal treatment of sellers. However, show that such regulation imposes virtually no restrictions on the ability to discriminate. We propose a simple rule -imitation perfection -that restricts discrimination significantly. It ensures that in every equilibrium bidders with the same value distribution and the same valuation earn the same expected surplus. If all bidders are homogeneous, revenue and social surplus optimal auctions which are consistent with imitation perfection exist. For heterogeneous bidders however, it is incompatible with revenue and social surplus optimization. Thus, a trade-off between non-discrimination and optimality exists.

This paper presents simple conditions for monopoly thirddegree price discrimination to have negative or positive e¤ects on aggregate consumer surplus. Consumer surplus is often reduced by discrimination, for example when total welfare (consumer surplus and pro…ts) falls. Surplus increases with discrimination, however, in two cases: …rst, when the marginal revenues without discrimination are close together and inverse demand in the market where the price will fall with discrimination is more convex; second, when inverse demand functions are highly convex and the discriminatory prices are close together.

We analyze empirically product-price variation across export destinations using detailed firm-product data. Most recent studies using highly disaggregated data emphasize variations in product quality as an explanation as to why firms charge different prices for the same product on different export markets. In this paper, we take an alternative approach and assume that variations in firms' export prices reflect market segmentation and investigate the relationship between price variation and average firm markup. We study an entire supply chain in order to see how price discrimination varies across sectors with different distribution networks. Specifically, we make use of firm-level data for exporting firms in the Swedish food supply chain. The results offer new information about the behavior of exporting firms. Hence, for the food-processing industry, firms with greater ability to discriminate between markets are associated with a higher markup. However, the results also reveal that markups are a complex function of firm characteristics and that the price-setting behavior of firms in the manufacturing sector is not necessarily observed in other sectors of the supply chain. ♣ We would like to thank seminar participants at IFN in Stockholm, March 2011, and Department of economics in Lund, May 2011. We are also grateful to conference participants at a variety of locations and conferences. Financial support from Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged.

The European Union’s Artificial Intelligence Act (AI Act) establishes a novel regulatory framework for AI systems, with far-reaching implications for data protection compliance. This study critically analyses the regulatory environment created by the Act and its interaction with the General Data Protection Regulation (GDPR), addressing whether it provides clearer compliance pathways or introduces additional burdens for developers. Using comparative legal analysis, the research finds that the AI Act supplements the GDPR through a risk-based approach that subjects high-risk AI systems to specific obligations. Key concerns include algorithmic opacity, bias, and legal uncertainty in profiling and automated decision-making. The analysis shows that the AI Act attempts to mitigate these risks by strengthening requirements on risk assessment, human oversight, and data governance. While the Act broadly aligns with GDPR principles such as transparency, fairness, and accountability, it also introduces new procedural and documentation duties that may increase compliance complexity. Overall, the study concludes that the AI Act constitutes a complementary yet stricter regulatory layer for AI-driven data processing, balancing innovation with fundamental rights protection and requiring joint interpretation with the GDPR to ensure coherent application.

This paper extends the traditional analysis of the output e¤ect under monopoly (third-degree) price discrimination to a multimarket Cournot oligopoly. Under symmetric Cournot oligopoly (all …rms selling in all markets) similar results to those under monopoly are obtained: in order for price discrimination to increase total output the demand and inverse demand of the strong market (the high price market) should be, as conjectured by , more concave than the demand and inverse demand of the weak market (the low price one). When competitive pressure (measured by the number of …rms) varies across markets the e¤ect of price discrimination on total output crucially depends on what market, the strong or the weak, is more competitive.

This paper extends the traditional analysis of the output effect under monopoly (third-degree) price discrimination to a multimarket oligopoly. The author shows that under oligopoly price discrimination, differences in competitive pressure, measured by the number of firms, across markets are more important than the relative demand curvature when determining the effect on total output.

This paper studies the welfare effects of third-degree price discrimination when competitive pressure varies across markets. In particular, we study the economic aspects of the Robinson–Patman Act associated with the “meeting competition defense.” Using equilibrium models, the main result we find is that this defense might be used successfully in cases of primary line injury precisely when it should not be used, namely when price discrimination reduces social welfare. This result obtains both when discrimination appears in the final good market and when it is used in the intermediate goods market. We also find that these results may maintain under secondary line injury.

This paper shows how the welfare effects of third-degree price discrimination may be decomposed into two effects: a misallocation effect and an output effect. It also presents a geometrical analysis which shows how the welfare properties of third-degree price discrimination must be assessed using nonlinear demands, and hence how linear demands are not suitable for the analysis.

This paper presents new results on the welfare e¤ects of thirddegree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity di¤erence between markets are high enough, then price discrimination not only can increase social welfare but also consumer surplus. (JEL D42, L12, L13) Financial support from the Ministerio de Economía y Competitividad (ECO2012-31626), and from the Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco (IT869-13) is gratefully acknowledged. We would like to thank Ilaski Barañano and Ignacio Palacios-Huerta for helpful comments.

In this paper, we show that in order for third-degree price discrimination to increase total output, the demands of the strong markets should be, as conjectured by , more concave than the demands of the weak markets. By making the distinction between adjusted concavity of the inverse demand and adjusted concavity of the direct demand, we are able to state necessary conditions and su¢ cient conditions for third-degree price discrimination to increase total output.

The paper investigates the effects on welfare of price discrimination when a multimarket seller faces competition in one of its two markets. With respect to uniform pricing, price discrimination changes competition in such a way, that even with linear demands, price discrimination can be welfareimproving, both under strategic substitutes and strategic complements.

In this paper, whe show that the strategic choice of spatial price policy under duopoly crucially depends on the rules of price competition. Thisse and Vives (1988) show that spatial price discrimination is a dominant strategy when the mill pricing firm is the leader and the discriminatory firm is the follower. When the leader-follower roles are reversed we find that equilibrium pricing policies depend on the consumer's reservation value. The pricing policy game has two equilibria in pure strategies, either both firms price uniformly (f.o.b.) or both firms price discriminate, when the reservation value is low. For intermediate levels of the reservation value, price discrimination is a dominant strategy and the pricing policy game is similar to a Prisoner's Dilemma. When the consumer reservation value is large enough we obtain asymmetric equilibria in which one firm prices according to f.o.b. and the other price discriminates. We also analyze the case of simultaneous price ...

This paper presents a general analysis of the effects of monopolistic third-degree price discrimination on welfare and output when all markets are served. Sufficient conditions—involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the different markets—are presented for discrimination to have negative or positive effects on social welfare and output. (JEL D42)

This paper analyzes how the pricing policy of an incumbent may signal information not only on the demand level but also on the demand composition. A signalling game with two periods and two players (an established firm and a potential entrant) is considered. The potential entrant has incomplete information on market demand. There exist many sequential equilibria in which the uniform price policy acts as an entry deterrence device by hiding actual market profitability. We can interpret the uniform pricing policy as a rejection of the use of superior information on market demand composition in order to reduce the entrant's expected profits.

This paper considers the relation between immigration and prices in a number of countries across the world over the period from 1990 to 2006. Immigration is shown to have a negative impact on international relative prices. A ten percent increase in the share of immigrant workers in total employment decreases the prices of final products by as much as three percent. Our results suggest that the tendency of this factor of production to relocate to relatively expen-sive high-wage countries exerts downward pressure on prices of tradeables and non-tradeables there relative to other locations. The effect of immigration on prices is more evident for goods consumed by immigrants as compared to goods produced by immigrants.

We focus on downstream uses that combine multiple intellectual property rights and examine the effects of introducing an intellectual property clearinghouse that reduces transaction costs associated with licensing. We show that this causes equilibrium royalties to rise in some cases and may harm licensors due to the ‘tragedy of the anticommons’. Downstream welfare effects may also be positive or negative and we characterise the effects on downstream manufacturers and final con-sumers. We also show that total welfare is most likely to increase following a transaction cost reduction when the number of intellectual property rights per downstream use is small, or if rights are relatively substitutable in downstream use, but it is also possible for welfare to decrease. JEL: L24, O34.

We use a spokes model to analyze …rms' customization incentives when facing the choices of standard and niche products. Products at or near the end of the spokes are customized products, while products near the origin are more standardized products that cater to the taste of many consumers. Our results indicate that although monopolist always o¤ers the standard product, if a …rm anticipates entry, it may choose to stake claim to a customized product. For low transportation costs, the early entrant chooses the standard product. But this equilibrium is characterized by aggressive pricing behavior. JEL Classi…cation: L11, L13.

In the earlier paper, we analyzed a possibility of CDM domino, where CDM (Clean Development Mechanism) is a flexibility mechanism adopted in the Kyoto protocol (KP) for the international scheme to prevent climate change due to emission of green house gases (GHG), and domino means adoption of one CDM project induces other CDM projects. In this paper, we attempt to analyze the opposite effect of project based mechanisms including CDM, i.e. the negative impact of adoption of one project upon other potential projects. This possibility has an important implication on the technological development for the prevention of climate change, as the early adoption of a technology receives an unduly special position so that newly developed technology has relatively fewer chances of a success. Even though people disagree over many issues, there seem to be widespread agreement that technological breakthrough is a key element for the long run success of international climate policy. Thus the evaluation of the effect of mechanisms on the technology development to overcome current reliance on carbon intensive technology is important, especially in the ongoing negotiation toward new schemes to be instituted for the period following the period covered by (KP).

The article examines price discrimination and collusion in spatial markets. The problem is analyzed in the context of a repeated duopoly game. I conclude that the prevailing pricing systems depend on the structural elements of the market. Delivered pricing systems emerge in equilibrium in highly monopolistic and highly competitive industries, while FOB is used in intermediate market structures. Thefact driving this result is that delivered pricing policies allow spatial price discrimination that facilitates collusion, but at the same time they have a very competitive feature: they are the only pricing rules that could be sustained in a very competitive market structure. * In some markets, sellers have the ability to discriminate among consumers by making price vary according to some characteristic of the buyer. Here I analyze a particular type of price discrimination common in spatial markets where a consumer's location is observable. In this situation the choice variable for the firm is a price system that specifies a price per unit of product at each location: each firm must choose a function p(x), where x is the distance between the location of the consumer and the location of the firm. In practice, different industries use different types of pricing systems, p(x), and this suggests that the prevailing pricing system depends on the structural elements of the market. When the pricing policy is FOB,' consumers can pick up the product at the mill, paying the mill price p and incurring the transportation cost from the producer's to the consumer's location, i.e., p(x) = p + t(x), or the seller may deliver the good to the buyer's location, as long as it charges mill price plus transportation costs. Delivered pricing policies are pricing rules p(x) that are not based on consumers picking up the product at the mill; the firm delivers the product at the consumer's location. In a perfectly competitive world with a continuum of firms, an FOB pricing system would be expected: p(x) = c + t(x), where c is the marginal cost of production. In the case of a market with two firms located at the

This paper analyzes union formation in a model of bargaining between a …rm and several unions. We address two questions: …rst, the optimal con…guration of unions (their number and size) and, second, the impact of the bargaining pattern (simultaneous or sequential). For workers, grouping into several unions works as a price discrimination device which, at the same time, decreases their market power. The analysis shows that optimal union con…guration depends on the rules that regulate the bargaining process (monopoly union, Nash bargaining or right to manage).

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We use actual loan applications submitted to a community development credit union (CDCU) and a traditional community bank to examine the role of relationship lending in the automobile loan market. We first show that the community bank relies upon credit scoring, not relationship lending; low-income households with poor credit histories are very unlikely to receive car loans from this traditional bank. We then show that relationship lending is a critical factor in the loan decision at the CDCU; low-income households with strong ties to the institution are likely to receive loans, despite poor credit histori es. We conclude that as consolidation, deregulation and technology move mainstream financial institutions away from relationship lending and toward credit scoring, CDCUs will occupy an increasingly critical niche for low-income households.

His research interests include adoption of information technology, electronic commerce, and Web personalization. He has published extensively on these topics in major management science and IS journals. He is currently on the editorial board of Information Systems Research and a number of IS journals. Professor Tam has extensive consulting experience with major companies including HSBC, Sun Microsystems, Symantec, and Hutchison Telecommunications.

The proliferation of shopping malls in virtually all economics of the world both that of the developed and developing ones can be linked to its patronage. This patronage which is gradually causing the loss of grip of the traditional market setting has been studied in line with gender, age, income, location, the image of the malls and type of shoppers amongst others. Due to the modern outfit and patronage, tenants of the malls have to be prepared for its rental payments. However, no study has specifically linked the patronage of malls with such. Therefore to achieve this aim two shopping malls located virtually in the same place were studied; the cocoa mall and heritage mall Ibadan. The study which is a cross-sectional survey entailed the distribution of copies of questionnaires to the tenants, interview with the manager of the malls and observation of frequency of shoppers to the malls. Data obtained were analyzed using the Chi-Square test of significance at 95% confidence level and...

Historically, the rate of black homeownership has been low compared to nonblacks. The purpose of this study is to assess the extent to which levels of black homeownership are determined by selected social factors and racial discrimination. The findings reveal that blacks are less likely to be homeowners in nearly every sociodemographic category. The one exception is the finding that elderly blacks are more likely than blacks and nonblacks in all other age categories to be homeowners.

We analyze how consumer myopia in ‡uences investment incentives into a technology that enables …rms to track consumers' purchases and make targeted o¤ers based on their preferences. In a two-period Hotelling setup …rms may invest in customer-tracking technology. If a …rm acquires the technology, it can practice …rst-degree price discrimination among consumers that bought from it in the …rst period. We distinguish between the cases of all consumers being myopic and when they are sophisticated. In equilibrium …rms collect customer data only when consumers are myopic. In that case two asymmetric equilibria emerge, with either one …rm investing in customer-tracking technology. We derive several surprising results for consumer policy: First, contrary to conventional wisdom, …rms are better-o¤ when consumers are sophisticated. Second, consumers may be better-o¤ being myopic than sophisticated, provided they are su¢ ciently patient (the discount factor is high enough). Third, in the latter case there is a tension between consumer and social welfare, and correspondingly between consumer and other policies: With myopic consumers, banning customer-tracking would increase social welfare, but may reduce consumer surplus.

We focus on four important features of mobile targeting. First, consumers'real-time locations are known to sellers. Second, location is not the only factor determining how responsive consumers are to discounts. Other factors such as age, income and occupation play a role, which are imperfectly observable to marketers. Third, sellers may infer consumer responsiveness from their past purchases. Fourth, …rms can deliver personalized o¤ers to consumers through mobile devices based on both their real-time locations and previous purchase behavior. We derive conditions that determine how combining behavior-based marketing with mobile geo-targeting in ‡uences pro…ts and welfare in a competitive environment. Our setting nests some earlier models of behavior-based price discrimination as special cases and yields additional insights. For instance, di¤erent from previous studies we show that pro…t and welfare e¤ects of behavioral targeting may depend on …rm discount factor.

We analyze …rms'location choices in a Hotelling model with two-dimensional consumer heterogeneity, along addresses and transport cost parameters ( ‡exibility). Firms can price discriminate based on perfect data on consumer addresses and (possibly) imperfect data on consumer ‡exibility. We show that …rms'location choices depend on how strongly consumers di¤er in ‡exibility. Precisely, when consumers are relatively homogeneous, equilibrium locations are socially optimal regardless of the quality of customer ‡exibility data. However, when consumers are relatively di¤erentiated, …rms make socially optimal location choices only when customer ‡exibility data is perfect. These results are driven by the optimal strategy of a …rm on its turf, monopolization or market-sharing, which in turn depends on consumer heterogeneity in ‡exibility. Our analysis is motivated by the availability of customer data, which allows …rms to practice third-degree price discrimination based on both consumer characteristics relevant in spatial competition, addresses and transport cost parameters.

We focus on four important features of mobile targeting. First, consumers' real-time locations are known to sellers. Second, location is not the only factor determining how responsive consumers are to discounts. Other factors such as age, income and occupation play a role, which are imperfectly observable to marketers. Third, sellers may infer consumer responsiveness from their past purchases. Fourth, firms can deliver personalized offers to consumers through mobile devices based on both their real-time locations and previous purchase behavior. We derive conditions that determine how combining behavior-based marketing with mobile geo-targeting influences profits and welfare in a competitive environment. Our setting nests some earlier models of behavior-based price discrimination as special cases and yields additional insights. For instance, different from previous studies we show that pro.t and welfare effects of behavioral targeting may depend on firm discount factor.

The rapidly improving ability of firms to collect, store, and analyze customer information opened up significant opportunities for personalized pricing and other personalized marketing activities. Customer loyalty programs provide a particularly important source of customer data. Such programs are widespread in the retail and airline

We analyze …rms'location choices in a Hotelling model with two-dimensional consumer heterogeneity, along addresses and transport cost parameters ( ‡exibility). Firms can price discriminate based on perfect data on consumer addresses and (possibly) imperfect data on consumer ‡exibility. We show that …rms'location choices depend on how strongly consumers di¤er in ‡exibility. Precisely, when consumers are relatively homogeneous, equilibrium locations are socially optimal regardless of the quality of customer ‡exibility data. However, when consumers are relatively di¤erentiated, …rms make socially optimal location choices only when customer ‡exibility data is perfect. These results are driven by the optimal strategy of a …rm on its turf, monopolization or market-sharing, which in turn depends on consumer heterogeneity in ‡exibility. Our analysis is motivated by the availability of customer data, which allows …rms to practice third-degree price discrimination based on both consumer characteristics relevant in spatial competition, addresses and transport cost parameters.

We analyze how consumer myopia in ‡uences investment incentives into a technology that enables …rms to track consumers' purchases and make targeted o¤ers based on their preferences. In a two-period Hotelling setup …rms may invest in customer-tracking technology. If a …rm acquires the technology, it can practice …rst-degree price discrimination among consumers that bought from it in the …rst period. We distinguish between the cases of all consumers being myopic and when they are sophisticated. In equilibrium …rms collect customer data only when consumers are myopic. In that case two asymmetric equilibria emerge, with either one …rm investing in customer-tracking technology. We derive several surprising results for consumer policy: First, contrary to conventional wisdom, …rms are better-o¤ when consumers are sophisticated. Second, consumers may be better-o¤ being myopic than sophisticated, provided they are su¢ ciently patient (the discount factor is high enough). Third, in the latter case there is a tension between consumer and social welfare, and correspondingly between consumer and other policies: With myopic consumers, banning customer-tracking would increase social welfare, but may reduce consumer surplus.

The illicit tobacco trade accounts for 10% of the global cigarette market and results in US$31 billion in lost tax revenues annually. Despite legal prosecution of tobacco companies, and the introduction of new policy responses, the trade has reached an all-time high. Previous research documents how transnational tobacco companies have sought to influence government responses to the illicit trade in various countries through multiple means, including influencing of news media framing. This paper extends this analysis to Canada where the illicit trade is particularly problematic in scale and political complexity. Articles in Canadian newspapers, published from 2010-2015, were systematically searched (n = 177) and analysed to identify dominant frames, frame sponsors and policy positions related to the illicit tobacco trade. The results show that the most common frames present the issue in ways favourable to the industry. The most common non-governmental sponsors of these frames frequently have links to the tobacco industry, which are rarely disclosed. Findings indicate the need for Canadian media to be critical in its use of data sources amid industry efforts to shape public policy, and the importance of reframing policy discussions in public health terms based on independent evidence.

The supersizing phenomenon where menu prices for large fast food portions appear to be well below their marginal production costs is of considerable scholarly and policy interest. This article examines a monopoly facing demand functions where the single-crossing condition is violated. We …nd a subset of cases under which a monopolist can separate two di¤erent rational consumer types while maximizing and capturing the total surplus associated with marginal-cost pricing. For our subset, the separating equilibrium creates an apparent supersizing discount even though the …rm does not actually sell the additional quantity below marginal cost. With public health interest in reducing portion sizes, we introduce the right-to-split as a policy alternative that breaks the separating equilibrium and leads to smaller quantities.

This paper studies sales promotions through coupons in an oligopoly under imperfect price information. Sellers can distribute either ordinary coupons, or coupon-(price) advertising, or both types of coupons, at distant locations to attract consumers from their rivals' markets. A unique symmetric pure strategy equilibrium exists where rebates and couponing intensity are always positive. In the ordinary coupons equilibrium, prices, promotional e®orts and sellers' pro¯ts are higher than in the coupon-advertising equilibrium. However, if sellers are allowed to distribute both types of coupons, only coupon-advertising is sent out in equilibrium.

Big Data technologies have significantly increased the possibility for sellers to adopt personalisation strategies, especially in digital markets. Among such strategies, price discrimination, a practice where the same commodity is sold at different prices, either to the same customer or to different customers, stands out. Particularly, the online airline ticket market has risen the attention of economists in recent studies, both because of its specificity and of the high data availability. This manuscript enters the debate and analyses the airline ticket market in an original way. Indeed, the aim of this work is to empirically understand whether some airline companies discriminate in prices by using the customers’ data that they collect from their websites, and, if so, which is the impact on social welfare. For performing this assessment, a software that is able to automatically collect pricing data is developed and freely released. By executing the software in two time periods, tic...

We investigate profit-maximizing versioning plans for an information goods monopolist. The analysis employs data obtained from a web-based field experiment in which potential buyers were offered information goods in varied price-quality configurations. Maximum simulated likelihood (MSL) methods are used to estimate parameters describing the distribution of utility function parameters across potential buyers of the good. The resulting estimates are used to examine the impact of versioning on seller profits and market efficiency.

This article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price (LOP) and relative price fluctuations. Search frictions lead firms to price discriminate across markets based on the opportunity cost of search, which depends on the local wage. With productivity and taste shocks estimated from the data, deviations from the LOP are as volatile and persistent as in the data. Fluctuations in relative wages, real exchange rates, and the terms of trade are also consistent with the data.

A central puzzle in international economics is that international relative prices, at the aggregate and disaggregate level, are volatile and persistent. Existing models based on perfect competition, monopolistic competition with constant elasticity demand, or sticky prices are unable to generate these relative price movements nor can they explain evidence of price dispersion of identical products within countries. This paper presents a model with search frictions to explain price dispersion. Introducing price dispersion into an otherwise standard two-country, two-good flexible price model substantially increases the volatility of the terms of trade and real exchange rate. With high price dispersion and risk aversion, the model accounts for 90 percent of the volatility in the terms of trade and all of the volatility in the real exchange rate. The model also accounts for 80 percent of the persistence in international relative prices. Moreover, the model breaks the tight link between the real exchange rate and the ratio of consumption across countries common to models with complete international risk sharing.

Retail and wholesale gasoline prices vary over time and across geographic locations due to differences in government policies and other factors that affect demand, costs, and market power. We use a two-equation, reduced-form model to determine the relative importance of these various factors. An increase in the price of crude oil has been virtually the only major factor contributing to a general rise in prices over the last couple of decades. Tax variations and mergers contribute substantially more to geographic price differentials than do price discrimination, cost factors, or pollution controls.

This thesis contributes to the research on determinants and welfare effects of real exchange rate movements. Chapters two to four focus on a discussion of money supply shocks as one of the sources of changes in the real exchange rate. More specifically chapter two contains a critical overview of empirical and theoretical research that contributes to our understanding of the monetary transmission mechanism in open economies. The chapter analyses two specific classes of models, liquidity models and sticky price models and investigates to which degree these models are able to rationalise the result of related empirical studies. The third chapter focuses on the determinants of the welfare effects of money supply shocks across countries if prices are sticky. It analyses specifically the implications of different forms of price stickiness. Furthermore it combines these nominal rigidities with different real imperfections in the labour market. The chapter concludes that the impact of a mon...

The informal credit market exhibits a number of striking features, of which include interlinkage and segmented markets. However, there is little existing theoretical analysis as to how segmentation arises within informal credit markets. I construct a new theoretical model of interlinkage in the context of the Hold Up Problem and moral hazard. I then utilise this framework to model the endogenous emergence of segmentation. I nd that if the Contested Segment has a su cient degree of market power, segmentation will arise. Under segmentation, I nd the the e ort levels are greater within the Home Segment when compared to the Contested Segment. These results are driven by the degree of social capital held between a farmer and trader which the Hold Up Problem encapsulates, and the level of market power that exists within informal credit markets. Further, I utilise this framework to analyse the impact of an Interest Rate Ceiling, and the entry of a Micro nance Institution, on the welfare of...