Production efficiency, input price discrimination, and social welfare

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Title:	Production efficiency, input price discrimination, and social welfare
Authors:	Kao, Kuo-Feng;Peng, Cheng-Hau
Contributors:	淡江大學產業經濟學系
Keywords:	production efficiency;price discrimination;vertically related markets
Date:	2012-08
Issue Date:	2012-09-14 12:48:03 (UTC+8)
Publisher:	Kowloon: City University of Hong Kong * Department of Economics & Finance
Abstract:	This paper re-examines the welfare implications of input price discrimination by considering the possibility of the structural change in the final goods market. When the marginal cost difference is moderate, price discrimination is more socially desirable as the upstream firm serves more downstream firms under price discrimination than uniform pricing. Surprisingly, when the marginal cost difference is sufficiently large, although the upstream monopolist serves more downstream firms and more outputs are produced under price discrimination than uniform pricing, the social welfare is lower under price discrimination. This result runs against those prevailing in the literature without market structural change.
Relation:	Asia-Pacific Journal of Accounting & Economics 19(2), p.227-237
DOI:	10.1080/16081625.2012.667382
Appears in Collections:	[Graduate Institute & Department of Industrial Economics] Journal Article

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