Choon Sei Lee
Soonchunhyang University
This study compares price discrimination and uniform pricing in a spatial
market of the Hotelling type. At first spatial monopoly is studied to compare
with the case of spatial monopolistic competition, which shows that price
discrimination requires different sorting mechanism depending on the type
of market structure. With the spatial monopolistic competition, the study
shows some positive results, comparing market shares, prices and output
under the two pricing policies. One of finding is that if consumers are
sorted based on the strengths of their brand preferences, consumer welfare
increases even without a quantity increase. Most of consumers may be better
off under price discrimination than they are under uniform pricing if consumers
differ greatly in their strengths of brand preference.