A PYMNTS Company

Price Discrimination and Welfare

By  |  November 1, 2009
Price Discrimination and Welfare

Barry Nalebuff, Nov 01, 2009

Elhauge (2009) provides a wide-ranging article that is impressive both in its clarity and its holistic attack on the practice of bundling and tying. In this commentary, I will focus my attention on one aspect of his presentation, namely the effect of price discrimination via metering and tying on consumer welfare and total welfare. Elhauge makes the claim that we should not suppose that the total welfare effects of price discrimination are positive. Even if they are, he suggests that this perspective is too narrow; a price-discriminating monopolist will make more money and so may incur greater ex ante costs to secure its market position. And if total welfare still rises after taking these costs into account, Elhauge makes the further argument that antitrust is and should be focused on consumer welfare, not total welfare. In that domain, the presumption should be that price discrimination lowers consumer welfare.

    Get the Full Story

    Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.

    yesSubscribe to our daily newsletter, PYMNTS Today.

    By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions.

    Links to Full Content