Third Degree Price Discrimination and Price Elasticities

14 Pages Posted: 11 Aug 1999

See all articles by Thomas D. Jeitschko

Thomas D. Jeitschko

Michigan State University - Department of Economics

Dominique Thon

University of Nordland

Date Written: April 1999

Abstract

According to conventional wisdom, if a monopolist operates in two separate markets whose respective demand functions can be ordered by elasticity, he will charge more on the market with the less elastic demand.

In this paper we debunk the widespread canard that this follows from the first order profit maximization conditions. It is shown that, on the other hand, an inverse relationship between price and elasticity follows--with some qualifications--from the properties of the star partial ordering applied to the two demand functions. A number of related results are also given.

JEL Classification: D42, L1

Suggested Citation

Jeitschko, Thomas D. and Thon, Dominique, Third Degree Price Discrimination and Price Elasticities (April 1999). Available at SSRN: https://ssrn.com/abstract=168592 or http://dx.doi.org/10.2139/ssrn.168592

Thomas D. Jeitschko (Contact Author)

Michigan State University - Department of Economics ( email )

110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~jeitschk/

Dominique Thon

University of Nordland ( email )

Bodoe 8049
Norway

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