Economics, Econometrics and Finance
4 years ago

Price discrimination by global firms can increase welfare but decrease total output.

RePEc: Research Papers in Economics
Quality differences, third-degree price discrimination, and welfare
Franciso Galera, Pedro Mendi, Juan Carlos Molero

Paper Summary

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The article explores how price discrimination by global firms can affect welfare when there are quality differences between local and global products. The researchers use a theoretical model to show that under certain conditions, welfare can increase even though total output decreases when global firms engage in price discrimination. This is because price discrimination can lead to a positive impact on resource allocation.