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This article extends the price discrimination literature and applies it to market definition and competitive effects analysis in recent mergers in the cruise line industry. In that industry, short run output is fixed. If firms want to increase price and restrict output to price‐insensitive customers, they have to increase the output and lower price to the price‐sensitive customers. We show that with fixed output (1) it is in firms’ interest to engage in price discrimination, (2) firms have increased ability to engage profitably in price discrimination as the intensity of competition decreases, and (3) the average price of price‐sensitive and ‐insensitive consumers increase with reduced competition. Unlike the economists at the Federal Trade Commission, our analysis suggests that cruise lines engage in third‐degree price discrimination. Moreover, the cruise industry could be a separate market and a reduction in the number of competitors might raise average prices.Price Discrimination, Fixed Output, Oligopolistic Competition, Antitrust, Merger, Cruise Industry, D4, L4, L8,

Much of the literature concerning trade liberalization focuses on estimating the effect of increased trade on aggregate economic indicators, such as the growth in GDP per capita. Although there is a general recognition that trade benefits consumers, there is little research that estimates the direct impact of increased trade on U.S. consumers. We take broad measures of the economic impact of trade liberalization from three authoritative studies and apply economic principles to estimate the impact of increased trade on the income of U.S. households. We find, for example, that U.S. households gained about $2,500 in 2002 from increased trade, or the equivalent of almost six percent of the median household income in that year. We believe these results should be given weight in the ongoing debate regarding the effect of globalization.Business Economics (2005) 40, 41–51; doi:10.2145/20050306

A patent owner is entitled to recover any additional profits that would have been earned but for infringement. This paper suggests the use of an adaptation of merger simulation to assess lost profits in patent infringement cases. A model of the industry with infringement is calibrated to observed prices and quantities and estimated demand elasticities. Lost profits are then estimated by calculating a new equilibrium without the infringing product(s).Simulation, Patents, Damages,

This article summarizes much of the literature on price discrimination, discussing the alterative approaches and the general conclusions on price discrimination's impact on output, prices, and welfare. It applies lessons from the literature to a specific proposal that would eliminate arbitrage in California wholesales gasoline markets, and in effect prevent some forms of price discrimination. It concludes that applying extensions of the existing models to industry data is very important for gaining a better understanding of the implications price discrimination, and the current debate on price dispersion would benefit from such research.Price Discrimination, Uniform Pricing, Gasoline, Oligopolistic Competition, Ricardian Equilibrium,