Price discrimination in asymmetric Cournot oligopoly

Abstract

In this article we examine the effects of third degree price discrimination in asymmetric Cournot oligopolies. We show that the average price is not affected by the extent of price discrimination. We find that the asymmetry between firms is reflected only by the output produced for the lowest-valuation consumers and firms produce equal quantities to the other consumer groups.JEL codes: D43

A conduct parameter model of price discrimination

“…An implication is that the average price in this price discrimination setting would be the same as the standard Cournot‐Nash price where there is no discrimination. Bakó and Kálecz‐Simon () show that the invariance result still holds when the firms are asymmetric. Moreover, Kutlu () shows that Hazledine's invariance result prevails under a more general functional form assumption for demand.…”

Price Discrimination in Quantity Setting Oligopoly

“…Hazledine [6] …nds that the average price in the market is independent of the level of price discrimination and thus concludes that the standard single-price models' prediction is not misleading in terms of the average price. Bakó and Kálecz-Simon [2] and Kutlu [11] con…rm the robustness of invariance of average price to the level of price discrimination. For the linear demand case, Kutlu [10] incorporates price discrimination in the Stackelberg [18] model and …nds that the leader does not price discriminate.…”

“…In Hazledine's [6] setting the average price is invariant to the number of segments, K. This invariance result is shown to be robust to other settings. For example, Bakó and Kálecz-Simon [2] show the invariance result for the asymmetric cost case and Kutlu [11] shows the invariance result for a functional form which is nesting constant elasticity demand function. However, in our capacity choice framework this invariance result breaks down.…”

“…1 The common approach in the literature on price discrimination in oligopoly follows the price competition approach. Borenstein [3], Chen [4], Holmes [8], 2 and Thisse and Vives [21] exemplify some of the studies that use the price competition approach.…”

Price Discrimination in Dynamic Cournot Competition

“…In addition, in [19], the average price is independent of the extent of price discrimination. It was generalized to a larger class of demand functions as = − ( 1 + 2 + ⋅ ⋅ ⋅ + ) by Kutlu [23] and to a situation with asymmetric costs by Mukherjee [24] and Bak and Klecz-Simon [25].…”