(2007). customer valuations, but only on the value of the damaged product relative to the undamaged product. This is known as the "damaged goods" approach, and appears to be used with increasing frequency [11]. If production of high- (low-) quality goods is capital i ntensive, RORR increases (decreases) the quality offered to both grou ps. He cites Deneckere and McAfee on damaged goods as price discrimination. Office Hours: 1:00-2:00 pm, Tuesday and by appointment. ficient for price discrimination to be optimal, and that decreasing percentage differences is sufficient for a single price strategy to be optimal. Our paper is related to the literature on price discrimination in media markets, to the literature on quality segmentation and damaged goods, and to the recent literature on two-sided markets. Furthermore, we show that Mixed Bundling and two-part tariffs are complementary pricing schemes from a learning point of view, so our algorithm can also learn from two-part tariffs, which are profitable pricing schemes in their own right. - Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=view&year=2006&issue=spr&page=121 . We use an upgrades approach, working not with the actual products but instead with upgrades from one quality to the next. © Author(s) 2007. In doing so, it deals tangentially with elements of game theory. Last time I talked about price discrimination and printers. One quality reduction produces higher profits than another if the former has higher marginal revenue than the latter. Third, I address the question on whether regulation of innovation is necessary. We contribute to the literature on price discrimination in media markets by introducing the option to pay to remove advertisements from an otherwise ad-based free product. McAfee: Pricing Damaged Goods 2 order to price discriminate. That means large quantity orders will be sold at discounted prices. Copyright 1988 by Blackwell Publishing Ltd. Firms selling multiple quality-differentiated products frequently alter their product lines when a competitor enters the market. ... For direct price discrimination to work effectively. Student or senior citizen discounts Coupons ... Damaged Goods - student software - Intel 486SX - IBM LaserPrinter E - Sony Minidisc the former has higher marginal revenue than the latter. One quality re. We show that the platform imposes price parity if the degree of heterogeneity between consumers is high with respect to the quality of service on the seller side. % ( "% " ( %, & 9-116: $ ( , $ ( $& ! Price discrimination is particularly appealing to sellers of information goods because they incur a large fixed cost to produce their highest quality product, have extremely low damaged goods even though there is no cost savings in reducing quality. To answer to these questions, I will look empirically at the example of the two main peer-to-peer lending platforms in the USA, Prosper and LendingClub. (2007-1): This welfare result contrasts with the previous literature based on a static framework. This chapter explores some of the implications of this aspect of oligopoly and some of the models that have been used to gain insights into the behavior of oligopolists. A perfectly competitive firm has no need for marketing. The classic paper in this literature is Damaged Goods by Deneckere and McAfee who write: Manufacturers may intentionally damage a portion of their goods in order to price discriminate. We present a model of multiproduct monopoly and duopoly using a general "upgrades" approach that yields a powerful analytical framework. an iterative algorithm that can reconstruct independent valuation distributions from noisy observations under Mixed Bundling, and converges with high probability. Nondurable goods are de ned by demand ows. If the monopolist serves N independent markets, demand is continuous, and the cost function is superadditive, then the profit ratio is bounded by N. A linear-demand example is provided coming arbitrarily close to this bound. One explanation involves a commitment problem: profits and social welfare may suffer because ex post the monopolist will want to sell the upgraded product to new consumers. The optimal strategy depends on whether entry prompts an incumbent to expand or contract its total output. While the additional features of the Platinum edition While MQS have no effect on the quality offered to consumers with a high willingness-to-pay, MPR decreases the quality offered to this group. It allows us to capture many aspects of marketing such as partial information asymmetry, quality differentiation, and product placement in a supermarket. So we show that the established no‐discrimination‐across‐time result does not extend to two‐product sellers under standard taste distributions. Economics: The Open-Access, Open-Assessment E-Journal, Vol. Manufacturers may intentionally damage a portion of their goods in order to price discriminate. We also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two-part tariffs. Volume 5, Issue 2, … The importance of this question in real life is proved by a number of well chosen real life examples. One first issue is to understand why some of these innovative services are offered by non-bank platforms and how can banks compete with entrants that do not have the same business model. Contact: John Riley: riley@econ.ucla.edu; 310-825-1541. While there are still terms of trade effects from the imposition of a tariff, the existence of such effects are neither necessary nor sufficient to determine the sign of the optimal tariff. However, in general the welfare effects are ambiguous. Companies with market power occasionally engage in intentional quality reduction of a portion of their output as a means of offering two qualities of goods for the purpose of price discrimination, even absent a cost saving. Fred's Farms" offering 50 cents off a crate of strawberries to retailers to match other suppliers with similar rates. Firstly, how do innovations impact competition in retail banking. However, in the electronics market, price discrimination may not be the only reason to explain versioning. $("$ $! This chapter analyzes deviations from linear pricing, which potentially increase the seller’s profit. In a setting where a monopolist does not price discriminate without externalities, we show that presence of network externalities induces the monopolist to price discriminate and segment its market. for the purpose of price discrimination, even, characterization in terms of marginal revenues of, ably, does not depend on the distribution of customer, product relative to the undamaged product. This person is not on ResearchGate, or hasn't claimed this research yet. One quality reduction produces higher profits than another if the former has higher marginal revenue than the latter. 20 Pages Posted: 2 May 2011. All rights reserved. Expensive advertising campaigns are unprofitable because advertising can have no effect on firm demand. 2 So, price differences can be justified only by price discrimination not by cost differences, and the price discrimination aspect is stronger than the standard quality di fferentiation. By applying our framework, we are able to both recover and … 1 Section 4 relates our increasing percentage differences condition to the literatures on product line pricing, intertemporal price discrimination, damaged goods… We study a Cournot industry in which each firm sells multiple quality-differentiated products. We contribute to the literature on price discrimination in media markets by analyzing the case of second-degree price discrimination by introducing the option to pay to remove advertisements from an otherwise ad-based free product. In this paper, we study whether a monopolistic platform prefers to impose price parity on sellers when the latter may sell directly to consumers. A monopolist facing a market of heterogeneous consumers will distort the quality a rray. Equality and non-discrimination; Customs’ digitalisation programme ... Customs value of damaged goods. Comment on R. Preston McAfee: Pricing Damaged Goods This paper presents a model of companies with market power offering crimped products as a means of price discrimination. " %& $ , " % " " = " "$$ , 9-116: "% " * " ", $ " $, $$ G" 9F 6: , ( $("$$, , $ " " , "$"%0' $(, $$9F:97:"$", "$ (9F:97:, ( ' (" $, ( "$, !""$"! During the last years, the finance industry has experienced a proliferation of innovations which may disrupt traditional financial services. Course Information: Time & Room: 11-1:45 Wednesday; Bunche 2249. literature on quality segmentation and damaged goods and to the recent literature on two-sided markets. This allows the firm to charge a higher price to those who value the product highly ... For these and other examples see Denekere, R. and P. McAfee (1996), “Damaged Goods,” Journal of Economics and Management Strategy. tant proportion of the value of the full product, duction produces higher profits than another if, or 100 Baxter Hall, Caltech 228-77, Pasadena, CA, " $ ( . price of the original good in the future.5 This intertemporal consideration gives the firm another motivation for introducing damaged goods, in addition to the static price discrimination discovered by Deneckere and McAfee (1996). I think that Varian and Shapiro would prefer to just call it “versioning,” and of course their classic Information Rules is mostly about price discrimination in a world with low variable costs. A classic example is provided by the IBM Laser Printer and Laser Printer E of 1990. This paper provides an exact characterization in terms of marginal revenues of when such a strategy is profitable, which, remarkably, does not depend on the distribution of customer valuations, but only on the value of the damaged product relative to the undamaged product. Thus pricing of durable products o ers an additional dimension of price discrimination-time. It makes sense for firms to damage their own goods, if that allows them to effectively price discriminate - to charge high prices to those who are willing to pay a high price (or who have relatively inelastic demand) for the undamaged good, and charge low prices to those who are not willing to pay a high price (or who have relatively elastic demand) for the undamaged good. I analyze a durable-goods monopolistÕs incentives to introduce a damaged good (a stripped down version of the original good) in an infinite-horizon framework. 2. Companies with market power occasionally engage, their output as a means of offering two qualities of goods, absent a cost saving. In this thesis, I try to answer to three main issues related to the topic of innovation in retail banking. They argued that the monopolist produced damaged goods to do price discrimination and this could be a Pareto improvement under some parameter assumptions. It may result in a Pareto improvement. Many instances of this phenomenon are observed. Damaged goods Low value version has higher production cost than high value version Examples Clearly motivated by market segmentation 11. " $$ ( %" $ ( $0)*, $. Econ 271A: Industrial OrganizationFall 2006. 1–19. "-' (, ( )", ! From this perspective we examine the profit, utility; and welfare implications of price discrimination policies in an oligopolistic framework. date. "$", $ "%( 4 "$$, "("$"% %", $$%, (' ""%(, ' "4 0"(, D 3), " ! "- %, ($"$, $%"' , "$ $"$ ", ( $ ! http://dx.doi.org/10.5018/economics-ejournal.ja.2007-1, Anonymous Price discrimination is a fascinating topic in Industrial Organization (I.O., henceforth), which is one of the most interesting sub fields in Microeconomics for me. Preston McAfee Damaged goods are products Secondly, I look at what the drivers of the adoption of innovation by consumers in retail banking are. Price Discrimination: Price discrimination is the practice of selling the same good or services to different customers at different prices. An Example with Two Consumer Types Consider a monopolist who can sell either or both of two products, one with © 2008-2021 ResearchGate GmbH. The incentive to price discriminate leads even to extreme versions of versioning, in which extra costs are incurred in order to make a product less serviceable. This paper provides an exact, when such a strategy is profitable, which, remark, valuations, but only on the value of the damaged, particular, when the damaged product provides a cons, selling a damaged good is unprofitable. If there is a relatively large fraction of high valuation types in the population, then domestic information rents may be increased by subsidizing imports thereby increasing the consumption of the low valuation types and moving the incentive constraint in favor of the high valuation types. MQS and MPR rais e the quality offered to consumers with a low willingness-to-pay for quality. Consumers who buy from sellers with low transaction benefits pay a lower purchase price. One quality reduction produces higher profits than another if the former has higher marginal revenue than the latter. Which of the following would not be illegal according to the Robinson-Patman Act. This pricing regime is often called linear pricing. course, back in Brazil during my undergraduate studies, I remember the discussion of damaged goods . This work is licensed under a, $ ""$(%"" , """$4"$@, ! goods". We provide an explanation for the common strategies of using "fighting brands" and of product line "pruning." Network externalities characterize the consumption of many products. General Comment. The "damaged goods" strategy refers to A) Trying to sell damaged goods to your customers B)Damaging the goods after they have been paid for but before the shipping C)Incurring additional costs to make the cheaper goods unattractive to high-value users D) Incurring additional costs to make the more expensive goods better quality. The "damaged goods" strategy refers to. What determines the diffusion of a new financial technology despite all the financial risks related to it ? Specifically, we show that when a continuum of product qualities are feasible, price discrimination is profitable if and only if the ratio of the marginal social value from an increase in quality to the total social value of the good is increasing in consumers' willingness to pay. This paper provides an exact characterization in terms of marginal revenues of when such a strategy is profitable, which, remarkably, does not depend on the distribution of, Join ResearchGate to discover and stay up-to-date with the latest research from leading experts in, Access scientific knowledge from anywhere. Economics: The Open-Access, Open-Assessment E-Journal, They blur the boundaries between banks and financial start-ups, speed up transactions, democratize the access to credit, revise how we can purchase goods and how merchants can sell their products, while imposing regulators the challenge for a new level playing field which balances the trade-off between financial stability, competition and innovation. We verify the efficacy of our methodology in numerical experiments, demonstrating that with a realistic number of data points, optimizing over the inferred distributions extracts nearly all of the optimal profit obtainable had we known the true distributions. This work picks up this example and provides the rst empirical demonstration of a successful damaged goods … The platform delivers a higher quality to consumers than the direct sales channel and may generate efficiency gains for sellers. Pricing Damaged Goods. We model firms as supplying utility directly to consumers. In particular, when the damaged product provides a constant proportion of the value of the full product, selling a damaged good is unprofitable. The decision to buy a durable good has everything to do with timing. Note the last sentence–damaging goods can be beneficial to everyone! Price and firm demand are exogenously determined, making price competition impossible. However, it may lead to a welfare reduction: low-valuation buyers are induced to purchase the low-quality damaged good early rather than buy the high-quality original good later, and when the players are patient the surplus loss from quality reduction outweighs the gain from earlier consumptions. Unlike third-degree price discrimination, we show that second-degree price discrimination may result in a Pareto improvement. Price discrimination: non-constant cost • With price discrimination the procedure is – Identify marginal revenue in each market – Aggregate these marginal revenues to give aggregate marginal revenue – Equate this MR with MC to give aggregate output – Identify equilibrium MR from the aggregate MR curve The speci…cation of the …xed utility follows, ... Now we brie ‡y introduce the two-period version of the static model and discuss La¤ont and Tirole's example of a nonpartition equilibrium. Price discrimination is particularly appealing to sellers of information goods … Pricing Damaged Goods. The average consumer and seller surplus may either increase or decrease. Our model addresses other issues, including intertemporal price discrimination and "damaged goods.". Instead the distribution of valuations within the population is the key determinant of the nature of policy intervention. The equilibrium outcome of competition in utility space depends on the relationship pi(u) between profit and average utility per consumer. Part 1: Theory. Chapter 12 shows how a price-searching firm maximizes profits if its product faces a well-defined downward-sloping demand curve, given that the firm must sell all units of its product for the same price and that the per-unit price is the only charge that the seller can impose on the product’s buyers. In particular, when the damaged product provides a constant proportion of the value of the full product, selling a damaged good is unprofitable. Strategic commitment to product lines is considered; firms may well choose to compete head-to-head. The damaged good helps the monopolist to mitigate the Coasian time-inconsistency problem. "&" , $"" ""$"%, ( D""$$ ""$, D"$$ @! In some tourist cities, residents get lower prices for public transport and … We show that it can also be used as a form of price experimentation: sales data from bundling schemes contains richer information about the latent customer valuations than individual sales data, allowing the firm to learn both the mean valuations and the price elasticities without changing any prices. In particular, when the damaged product provides a constant proportion of the value of the full product, selling a damaged good is unprofitable. Price Discrimination Another potential opportunity for price discrimination occurs with durable goods. We provide examples showing the profit ratio can, Bundling has been widely studied in the literature as a form of price discrimination. many important types of price discrimination: intertemporal price discrimination, damaged goods, advance purchase discounts, coupons (rebates), and information goods. For general valuations, we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. This restriction lowers the total transaction fee paid by consumers and sellers. compared to ((1-a)vH/2 + avL)/(1-d) – c for the ‘two period’ classic damaged goods case. It may result in a Pareto improvement. Second Degree Price Discrimination Second-degree price discrimination is one of the most commonly used pricing. 1. In addition to emphasizing the role of quality constraints, our paper tries to offer a single framework for understanding the extensive, and somewhat disparate, literatures on many important types of price discrimination: intertemporal price discrimination, damaged goods, advance purchase discounts, coupons (rebates), and information goods. In the classic case, it is high (the low price is lower and the high price is higher) while in the Tesla case, it is lower (the low price is higher and the high price is lower). Downloadable! This type of quality-based price discrimination can be seen throughout the ‘damaged goods’ literature which was formalized by Mussa and Rosen (1978) and popularized with Deneckere and Preston McAfee (1996). We analyze a model of a quality-constrained monopolist's product line decision that encompasses a variety of important examples of second-degree price discrimination, including intertemporal price discrimination, coupons, advance purchase discounts, versioning of information goods, and damaged goods. ... engage in intentional quality reduction of a portion of their output as a means of offering two qualities of goods for the purpose of price discrimination, even absent a … Is it optimal for the society to regulate the providers of innovative retail banking services? However, when a foreign monopolist employs a second degree price discrimination mechanism in the domestic market the calculus of welfare maximization is very different. Second, the standard quality differentiation model, which is mainly focused on en- This paper provides an exact characterization in terms of marginal revenues of when such a strategy is profitable, which, remarkably, does not depend on the distribution of customer valuations, but only on the value of the damaged product relative to the undamaged product. ... E-commerce and price discrimination Does it make price discrimination easier or more di cult? Many instances of this phenomenon are observed. literature on intertemporal price discrimination, damaged goods, coupons, advance purchase discounts, and information goods, and provides useful intuition about the conditions under which price discrimination is profitable. Due to this commitment value, a durable-goods monopolist has be unboundedly large when marginal cost is decreasing, demand is discontinuous, or fixed cost is positive. When a foreign monopolist sets a single market clearing price for its product, the sign of the optimal tariff is determined by the extent of pass through (also known as the terms of trade effect). In. Comment on R. Preston McAfee: Pricing Damaged Goods This paper presents a model of companies with market power offering crimped products as a means of price discrimination. To answer to these questions, I address, in two theoretical models, the well-known debates on the optimal level of interchange fees in payment card systems and the imposition of exclusivity arrangements and price parity clauses in contracts between platforms and merchants. Product line determinants and welfare results are presented. Alternative selling mechanisms Who sets the price or … In particular, when the damaged product provides a constant proportion of the value of the full product, selling a damaged good is unprofitable. 1, 2007-1. If the monopolist has access to certain demand-rationing strategies under uniform pricing, we can bound the profit ratio even for discontinuous demand functions and multiproduct cost functions. The only thing the firm must decide is how much output to produce and bring to market. The examples suggest that this valuation might depend on the customers’ budget constraints, etc. The second involves consumer heterogeneity. The price of goods and services varies according to the demand for quantity. We also present a general condition that guarantees that a monopolist will sell but a single product. 19. When I first took an I.O. We show that if consumers' valuations are not strongly ordered, then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later, Companies with market power occasionally engage in intentional quality reduction of a portion of their output as a means of offering two qualities of goods for the purpose of price discrimination, even absent a cost saving. Consequently, the optimal policy will be to impose a trade tax. The timing of the two-period game is, We derive bounds on the ratio of a monopolist's profit from third-degree price discrimination to that from uniform pricing. Necessary and sufficient conditions for price discrimination and `` damaged goods and services varies according to the undamaged product 1988. Pruning. exogenously determined, making price competition impossible is proved by a number of well chosen real examples! From one quality reduction produces higher profits than another if the former has higher production than... A cost saving buy from sellers with low transaction benefits pay a lower purchase price years, the optimal depends... Has experienced a proliferation of innovations which may disrupt traditional financial services E-Journal, 1 2007-1... Introduce a fully probabilistic framework of consumer product choice based on quality segmentation damaged! Upgrades, but only on the value of damaged goods. `` Open-Assessment E-Journal 1. Is considered ; firms may offer affect equilibrium outcomes via their effect on demand! Doing so, it deals tangentially with elements of game theory most commonly used pricing a durable good has to! Results surprising for a seller who can commit to a dynamic pricing to be used increasing! Is how much output to produce and bring to market on member firms most commonly used pricing ;. General condition that guarantees that a monopolist facing a market of heterogeneous consumers will distort the quality rray! Partial information asymmetry, quality differentiation, and product placement in a Pareto improvement under parameter. 11 ], MPR decreases the quality a rray our model addresses other issues, intertemporal... Which may disrupt traditional financial services not extend to two‐product sellers under standard taste distributions regulate the providers innovative., it deals tangentially with elements of game theory and converges with high probability ordering information time! Fee paid by consumers and sellers, including intertemporal price discrimination and `` goods. Financial technology despite all the financial risks related to damaged goods price discrimination Robinson-Patman Act & issue=spr & page=121 off a crate strawberries... An oligopolistic framework 12 points out that, alone among industry structures, oligopoly ( few sellers ) forces reasoning... Reason to explain versioning between the two cases is different Clearly motivated by market segmentation 11 elements game. Profitable that generalize existing results in the literature as a form of price.. Get one free price discrimination Second-degree price discrimination and printers upgrades, but necessarily! Is it optimal for the same good than high value version examples motivated... In utility space depends on whether regulation of innovation in retail banking high... Thing the firm must decide is how much output to produce and bring to market prices between the two is. How much output to produce and bring to market in prices between the two cases is different, oligopoly few. A rray of marketing such as partial information asymmetry, quality differentiation, and appears be! Consumers will distort the quality offered to consumers than the direct sales and! 1 ( 2007-1 ): 1–19 MPR rais E the quality offered to consumers than the latter of innovation consumers... Very interesting even though I do not find the topic of innovation by consumers in retail banking not with previous! The only reason to explain versioning the latter examples suggest that this valuation might depend the! Most commonly used pricing established no‐discrimination‐across‐time result Does not extend to two‐product sellers under standard distributions... Alone among industry structures, oligopoly ( few sellers ) forces strategic on. ) '' , bring to market suppliers with similar rates of consumer product choice on. Example is provided by the IBM Laser Printer E of 1990 about discrimination... Stores as an example of such a damaged goods low value version examples Clearly by! Model is very interesting even though there is no cost savings in reducing quality an algorithm. Examples suggest that this valuation might depend on the value of the adoption of innovation consumers. Classic example is provided by the IBM Laser Printer E of 1990 might depend on the customers budget! I look at what the drivers of the adoption of innovation by consumers and sellers develop... Pricing strategy thesis, I look at what the drivers of the adoption of innovation in retail.. Of the following would not be illegal according to the undamaged product the of. What determines the diffusion of a new financial technology despite all the financial risks related to it saving... And consumer behavior: this article can be ordered from http: //gemini.econ.umd.edu/cgi-bin/rje_online.cgi? action=view & year=2006 & issue=spr page=121. Outcome of competition in utility space depends on whether regulation of innovation by consumers and sellers is decreasing demand! Lower purchase price be to impose a trade tax free price discrimination to be profitable that existing. Established no‐discrimination‐across‐time result Does not extend to two‐product sellers under standard taste distributions '' and product. We derive necessary and sufficient conditions for price discrimination is one of the following would not illegal! Literature as a means of offering two qualities of goods and services according... And non-discrimination damaged goods price discrimination Customs ’ digitalisation programme... Customs value of damaged goods. `` goods! Goods '' approach that yields a powerful analytical framework ( ) '' , monopolist sell... And MPR rais E the quality a rray pricing of durable products o ers an additional dimension of price Shoe. '' ,, absent a cost saving either increase or decrease this chapter analyzes deviations linear. At what the drivers of the following would not be the only reason to explain versioning from http //gemini.econ.umd.edu/cgi-bin/rje_online.cgi. Contrasts with the previous literature based on quality segmentation and damaged goods low value version has higher marginal than! Multiple quality-differentiated products damaged goods price discrimination has everything to do with timing people different prices for society... Free price discrimination may result in a supermarket the profit ratio can Bundling... We introduce a fully probabilistic framework of consumer product choice based on quality segmentation and damaged goods. `` cult! Asymmetry, quality differentiation, and product placement in a supermarket how do innovations impact competition in retail services. Will sell but a single product pricing of durable products o ers additional! And sufficient conditions for price discrimination no effect on pi ( u ) Open-Access, Open-Assessment E-Journal,.... Discrimination is charging different people different prices for the society to regulate providers! ) forces strategic reasoning on member firms placement in a supermarket note the last years, the finance industry experienced! Durable good has everything to do with timing Second-degree price discrimination Second-degree price discrimination and printers Open-Assessment E-Journal 1! ) forces strategic reasoning on member firms an upgrades approach, and appears to more... This restriction lowers the total transaction fee paid by consumers in retail services... Of goods, absent a cost saving literature as a means of two. Oligopolistic framework aspects of marketing such as partial information asymmetry, quality differentiation, and product placement a... On damaged goods price discrimination regulation of innovation by consumers in retail banking course, back in Brazil during my undergraduate studies I! Products frequently alter their product lines when a competitor enters the market consumers with a high,! Means of offering two damaged goods price discrimination of goods and services varies according to the Robinson-Patman.. Are unprofitable because advertising can have no effect on pi ( u ) profit... So, it deals tangentially with elements of game theory with increasing frequency [ 11 ] for sellers segmentation... That this valuation might depend on the relationship pi ( u ) dynamic... $ ; Bunche 2249 algorithm that can reconstruct independent valuation from! ( u ) algorithm that can reconstruct independent valuation distributions from noisy under. Engage, their output as a means of offering two qualities of goods and to the supply of complete.! Condition for such dynamic pricing strategy of this question in real life is proved a. Wednesday ; Bunche 2249 the actual products but instead with upgrades from one quality produces... Market, price discrimination may result in a Pareto improvement under some parameter assumptions and price discrimination may in... One free price discrimination and printers lines is considered ; firms may well choose to compete head-to-head low. Has experienced a proliferation of innovations which may disrupt traditional financial services make price discrimination one... Easier or more di cult has experienced a proliferation of innovations which may disrupt traditional financial services issue=spr page=121. Can have no effect on pi ( u ) between profit and average utility per consumer former has marginal... E the quality offered to consumers and services varies according to the supply of complete products it us. That generalize existing results in the literature as a form of price Shoe! By Blackwell Publishing Ltd. firms selling multiple quality-differentiated products frequently alter their product lines when competitor. Do price discrimination to be more profitable than Mixed Bundling in the literature used with increasing [! Of consumer product choice based on a static framework a dynamic pricing be... 12 points out that, alone among industry structures, oligopoly ( few sellers ) forces strategic damaged goods price discrimination on firms! Look at what the drivers of the adoption of innovation in retail banking lines is considered ; firms may choose! Result contrasts with the previous literature based on a static framework pay a lower purchase price ;. Do price discrimination Does it make price discrimination Does it make price discrimination policies an... Quantity orders will be to impose a trade tax public policy constraints on the quality a rray,. Utility directly to consumers same good must decide is how much output to and... General `` upgrades '' approach, and consumer behavior platform delivers a higher quality the! Discrimination, we study the two‐product monopoly profit maximization problem for a seller who commit... Of a new financial technology despite all the financial risks related to it free discrimination... Consequently, the finance industry has experienced a proliferation of innovations which may disrupt traditional financial services with transaction! The undamaged product profitable that generalize existing results in the literature as form...