Wholesale price discrimination and enforcement of regulation

Abstract

The present paper studied third-degree price discrimination in wholesale markets and its welfare property when a monopolistic manufacturer sells his/her products to two retailers who have different qualities and costs of sales. Our results revealed that price discrimination within a certain extent increases social welfare under some conditions, which would support the soft enforcement of prohibiting price discrimination by a monopolistic wholesaler.Third-degree price discrimination, Price competition with vertical differentiation, Upstream-Downstream relationships