Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment

RAND Journal of Economics, Vol. 29, No. 2

Posted: 8 Jul 1998

See all articles by Kenneth S. Corts

Kenneth S. Corts

University of Toronto - Rotman School of Management

Abstract

Price discrimination by imperfectly competitive firms may intensify competition, leading to lower prices for all consumers; the trade-off of consumer groups' welfare that is characteristic of monopolistic discrimination need not arise. This escalation of competition may make firms worse off, and as a result firms may wish to avoid the discriminatory outcome. Under conditions similar to those in which unambiguous price and welfare effects may arise, unilateral commitments not to price discriminate--including the adoption of everyday low pricing or no-haggle policies--may raise firm profits by softening price competition.

JEL Classification: L13

Suggested Citation

Corts, Kenneth S., Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment. RAND Journal of Economics, Vol. 29, No. 2, Available at SSRN: https://ssrn.com/abstract=105688

Kenneth S. Corts (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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