Income Dispersion and Price Discrimination

16 Pages Posted: 8 May 2006

See all articles by Yong He

Yong He

REPD, Universite Pierre-Mendes France, and ENSGI-F

Guang-Zhen Sun

Monash University - Department of Economics; Max Planck Institute for Research Into Economic Systems

Abstract

This paper analyses the effects of inter-market and intra-market income heterogeneities on output and social welfare under uniform pricing and differential pricing regimes by considering a finite number of markets. We first derive the linear demand curve in each market under plausible conditions, and then show that more markets (and consumers) are excluded under uniform pricing the higher are the inter-market income differences. We also show that adding markets, even of lower income levels than those of existing markets, helps to decrease prices and thus cause more markets to be served. Implications of intra-market income dispersion are also explored.

Suggested Citation

He, Yong and Sun, Guang-Zhen, Income Dispersion and Price Discrimination. Pacific Economic Review, Vol. 11, No. 1, pp. 59-74, February 2006, Available at SSRN: https://ssrn.com/abstract=894144 or http://dx.doi.org/10.1111/j.1468-0106.2006.00299.x

Yong He (Contact Author)

REPD, Universite Pierre-Mendes France, and ENSGI-F ( email )

Grenoble
France

Guang-Zhen Sun

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia
61-3-99052409 (Phone)
61-3-99055476 (Fax)

Max Planck Institute for Research Into Economic Systems

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

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