Private and social incentives to discriminate in oligopoly

Abstract

In an oligopoly model with switching costs firms have no incentive to discriminate by price (third degree), if the environment is symmetric. This is partly due to the fact that prices decrease unambiguously with price discrimination. In an asymmetric environment a firm enjoying some advantage may well have an incentive to discriminate. In all cases price discrimination increases social surplus. The antitrust treatment of price discrimination thus has to be questioned. --