recent advances in the theory of third-degree price discrimination: a nexus to network effects, innovation, and behavioral aspects

​This book provides an updated overview of the recent progress in the theoretical study of third-degree price discrimination. It is a marketing tactic and is said to be present if the unit price is different across different groups of buyers. Its welfare evaluation is often difficult because it entails two countervailing effects: on one hand, it exploits surplus from consumers who have high willingness-to-pay, but on the other hand, it generates gains from trade from consumers who otherwise would not purchase the good. Recognizing this difficulty, we provide new insights on evaluation of third-degree price discrimination in consideration of network effects and vertical product differentiation. Our analysis is particularly useful for the industries related to information and communication technologies (ICT) because these two elements characterize them. Furthermore, we also study the welfare effects of third-degree price discrimination under imperfect competition other than monopoly. At first, it seems that it may complicate the analysis under monopoly. However, we argue that the main thrusts of analysis under monopoly carry over to the case of oligopoly. We also take into account behavioral aspects and their implications for studying third-degree price discrimination. Overall, this book is designed to provide implications for contemporary management and policy issues by advancing theoretical issues in industrial organization.

Takanori Adachi is an associate professor at the Graduate School of Management and the Graduate School of Economics, Kyoto University, Japan. He received a Ph.D. in economics from the University of Pennsylvania, USA. His research interests include industrial organization, competition policy, applied microeconomics, and empirical microeconomics.

Ryo Hashizume is an associate professor at the Faculty of Economics, Hannan University, Japan. He received a Ph.D. in economics from Kyoto University. His research interests include industrial organization and applied microeconomics.

Takeshi Ikeda is a professor at the Faculty of Economics, Daito Bunka University, Japan. He received a Ph.D. in economics from Osaka City University, Japan. His research interests include industrial organization, competition policy, and international trade.

Tatsuhiko Nariu is a guest professor at the Graduate School of Business, Doshisha University, and a professor emeritus at Kyoto University. He received a Ph.D. in economics from North Carolina State University, Raleigh, USA, and a Ph.D. in economics from Kyoto University. His research interests include industrial organization, marketing and distribution.

Tomohisa Okada is a lecturer at the Faculty of Economics, Daito Bunka University. He received a Ph.D. in economics from Nagoya University, Japan. His research interests include industrial organization, behavioral economics, and experimental economics.