Iñaki Aguirre

Welfare Effects of Third-Degree Price Discrimination: Ippolito Meets Schmalensee and Varian

Based on a pioneering work by Ippolito (1980) we construct a sim- ple model which allows the welfare eects of third-degree price discrim- ination to be well understood and explained. The decomposition of the change in welfare into a misallocation eect and an output eect has advantages over the well-established analysis by Schmalensee (1981) and Varian (1985). In particular, our approach provides a graphic analysis which clari…es the welfare analysis of third-degree price dis- crimination. (JEL D42, L12, L13)

Joan Robinson Was Almost Right: Output Under Third-Degree Price Discrimination

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 Robinson (1933), 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.

Regulating a Multiproduct Monopolist with Unknown Demand: Cross-Subsidization and Countervailing Incentives

This paper studies the regulation of a multiproduct monopolist that has private information about demand conditions. In particular, we consider the regulation of a two-product monopolist with interdependent demands when it has better information concerning the demand of one product than the regulator and public funds are costly. We show that the optimal regulation policy in this case crucially depends on whether goods are substitutes or complements. Cross-subsidization arises with demand complementarities, making it likely that countervailing incentives characterize the optimal contract.

On the Economics of the “Meeting Competition Defense” Under the Robinson–Patman Act

Abstract 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.