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Price discrimination in a rent-seeking economy

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Abstract

This paper examines the incentive and the consequences of using discriminatory pricing by a monopolist in a rent-seeking economy. It is shown that, even if all consumer groups' demands have identical elasticities at any given price, the monopolist has an incentive to charge a lower price to high pressure consumer groups so as to alleviate their rent-seeking efforts in challenging its monopolistic power. Furthermore, it is shown that by allowing the firm to price discriminate total welfare may increase, even if all rent-seeking expenditures are completely wasteful.

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Authors and Affiliations

  1. Department of Economics, University of Missouri-Columbia, 65211, Columbia, MO, U.S.A.

    Francis K. Cheung & Xinghe Wang

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  1. Francis K. Cheung
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  2. Xinghe Wang
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Additional information

We are grateful to Peter Mueser for his helpful comments on an earlier version of the paper.

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Cheung, F.K., Wang, X. Price discrimination in a rent-seeking economy. Public Choice 86, 103–116 (1996). https://doi.org/10.1007/BF00114877

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  • DOI: https://doi.org/10.1007/BF00114877

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