We consider second-degree price discrimination for two types of consumers. When the net-of-cost valuation functions cross at least once at some positive quantity, it is always optimal to serve both types of consumers. Moreover, the type with the higher valuation peak always gets the socially...

Using a general model that allows for outside option and consumer heterogeneity, we show that, when consumers are uniformly distributed in a unit interval, the critical determinant of the extent of attainable horizontal differentiation is the maximum value of their reservation price. When it is...

This pedagogical note explains how the same basic principle can be applied to explain the profit-maximizing behavior of a monopolist under both linear and nonlinear pricing by introducing an average price function. It is shown that optimal conditions under nonlinear pricing are similar to that...

We compare second-degree price discrimination with uniform pricing using two linear demands. Our comparison shows that second-degree price discrimination can result in a welfare-enhancing market foreclosure (both markets are served under uniform pricing but one of them is excluded under...

By focusing on the two intercepts — the price and quantity intercepts — of inverse linear demands, this note shows that compared to uniform pricing, third-degree price discrimination can be neutral. When all price intercepts of sub-markets' inverse demands are the same, not only will all the...

We question the prevailing wisdom that a profit-maximizing monopolist using linear pricing cannot produce socially efficient output. We show that when market demand function exhibits a flat portion, the prevailing wisdom may not be true. Such a flat portion in demand is consistent with weakly...