Economic Theory Bulletin

, Volume 3, Issue 2, pp 329–340 | Cite as

Monopoly price discrimination with constant elasticity demand

Research Article


This paper presents new results on the welfare effects of third-degree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity difference between markets are high enough, then price discrimination not only can increase social welfare but also consumer surplus. We also obtain new bounds on the welfare change for log-convex demands.


Monopoly price discrimination Social welfare  Constant elasticity demand 

JEL Classification

D42 L12 L13 



Financial support from the Ministerio de Economía y Competitividad (ECO2012-31626), and from the Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco (IT869-13) is gratefully acknowledged. We would like to thank Ilaski Barañano, Preston McAfee, Ignacio Palacios-Huerta and an anonymous referee for helpful comments.


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Copyright information

© Society for the Advancement of Economic Theory 2014

Authors and Affiliations

  1. 1.Departamento de Fundamentos del Análisis Económico I and BRiDGE GroupUniversity of the Basque Country UPV/EHUBilbaoSpain
  2. 2.Department of EconomicsUniversity of OxfordOxfordUK

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