Monday, March 27, 2006

Price Discrimination in Competitive Markets

"Standard economics has long held that firms can price discriminate only when they have monopoly power. Antitrust authorities and other regulators are thus tempted to use the existence of price discrimination as one indicator that a firm should possibly be subject to government investigation. In this monograph Professor Baumol shows that price discrimination not only exists in competitive markets but sometimes is a crucial feature of them. Baumol concludes by urging regulators to tread carefully when applying theory to policy. "

This is from a monograph written by Bill Baumol, a retired professor at NYU.

Price discrimination in a competitive markets, is that really a "new" discovery?

Professor Steven N.S. Cheung noted as early as 1983 in his What the Tangerine Seller Said, a book of his newspaper columns in Chinese, that his own experience from selling tangerine during the Chinese New Year was that price discrimination was widespread even when your neighboring stores were selling exactly the same things as yours.

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