THIRD-DEGREE PRICE DISCRIMINATION ANDCONSUMER SURPLUS

This paper presents simple conditions for monopoly third-degree price discrimination to have negative or positive e¤ectson aggregate consumer surplus. Consumer surplus is often re-duced by discrimination, for example when total welfare (con-sumer surplus and pro…ts) falls. Surplus increases with discrimi-nation, however, in two cases: …rst, when the marginal revenueswithout discrimination are close together and inverse demand inthe market where the price will fall with discrimination is moreconvex; second, when inverse demand functions are highly convexand the discriminatory prices are close together....