Tommaso M. Valletti
"Input price discrimination with downstream Cournot competitors"
JEL codes: D42
Keywords: input price discrimination
Abstract: This paper addresses third-degree price discrimination in input markets. I decompose the upstream monopolistís profit into two parts, one that depends on average input prices, and one that depends on their distribution. This decomposition is useful in comparing the welfare properties of price discrimination against uniform pricing. Under reasonable assumptions, input price discrimination negatively affects both consumer surplus and total welfare.