Third-Degree Price Discrimination with Fairness-Concerned Consumers

This paper studies monopolistic third-degree price discrimination incorporating consumers' fairness concerns: Discriminatory pricing antagonizes consumers and may reduce their demand. In contrast to previous studies, we show that consumers' concerns about price inequity may deter discriminatory pricing by monopolists. Furthermore, a strong aversion to unfair pricing may improve social welfare relative to the case with no fairness concerns, but if the disutility from price inequity is not sufficiently large, social welfare falls