An Empirical Investigation of the Welfare Effects of Banning Wholesale Price Discrimination

Posted: 9 Mar 2019

See all articles by Sofia Berto Villas-Boas

Sofia Berto Villas-Boas

University of California, Berkeley - Agricultural & Resource Economics

Date Written: September 28, 2009

Abstract

Economic theory does not provide sharp predictions on the welfare effects of banning wholesale
price discrimination: if downstream cost differences exist, then discrimination shifts production
inefficiently, toward high-cost retailers, so a ban increases welfare; if differences in price elasticity
of demand across retailers exist, discrimination may increase welfare if quantity sold increases,
so a ban reduces welfare. Using retail prices and quantities of coffee brands sold by German
retailers, I estimate a model of demand and supply and separate cost and demand differences.
Simulating a ban on wholesale price discrimination has positive welfare effects in this market,
and less if downstream cost differences shrink, or with less competition.

Suggested Citation

Villas-Boas, Sofia, An Empirical Investigation of the Welfare Effects of Banning Wholesale Price Discrimination (September 28, 2009). RAND Journal of Economics, Vol. 40, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=3044596

Sofia Villas-Boas (Contact Author)

University of California, Berkeley - Agricultural & Resource Economics ( email )

310 Giannini Hall # 3310
Berkeley, CA 94720
United States
510-643-6359 (Phone)
510-643-8911 (Fax)

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