Nonlinear Pricing Without Market Power : A Second-Best Invisible Hand

According to received Economic Theory, the implementation of price discrimination by a firm requires market power, at least in the short term. However, mere observation of reality, confirmed by empirical studies, shows that in extremely competitive industries, with approximately zero economic profit, the practice of price discrimination is verified, especially its second degree variant (Nonlinear Pricing), this phenomenon being more the rule than the exception.This paper explains theoretically the sustainability of second degree price discrimination in perfectly contestable markets (a generalisation of the notion of perfectly competitive markets i.e. those without any market power), thus explaining an empirical phenomenon not authorised by received Economic Theory. Nonlinear Pricing systems emerge as mechanisms that, in competitive environments, and with minimal central planning (centralisation of information), will allow greater social efficiency, constituting a "second-best invisible hand."