Essays on price discrimination and minimum quality standard.

Abstract

Public goods and price discrimination. The problem we are interested in is third-degree price discrimination with a price-excludable public good. Conditions characterizing uniform pricing and price discrimination are specified and compared. The effect of price discrimination on social welfare is analyzed by deriving the lower and upper bounds for welfare change. It is shown that, in most cases, a sufficient but not necessary condition for social welfare to increase is that output increases. For a public good, it is possible and even common that social welfare might be higher under price discrimination even though output is smaller. Effects of spatial price discrimination: Oligopoly and product differentiation. We extend Hwang and Mai (1990 June AER)'s analysis to incorporate aspects of oligopolistic market structure and product differentiation, and derive results that can be compared with those of a non-spatial analog in terms of the effects of price discrimination on total output, welfare and consumer surplus. It is shown how misleading is ignoring the spatial aspect when markets are actually apart in space. Minimum quality standard: Horizontal differentiation and oligopoly. We look at horizontally differentiated consumers with quality considerations at the same time. It is shown that the nature of strategic competition through qualities, i.e. whether qualities of firms are strategic substitutes or complements is crucial in analyzing the changes in qualities and profits of each firm in response to an MQS. In the symmetric case, this nature of competition determines the firms' position toward the regulation. In the asymmetric case, MQS offers an official mechanism for the less efficient firm of lower quality to credibly commit to a higher quality level and the more efficient firm of higher quality responds strategically to the commitment.