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Francisco Galera and Pedro Mendi
''Free entry and welfare with price discrimination''
( 2011, Vol. 31 No.4 )
We show that if firms in an industry engage in third-degree price discrimination, the number of firms in the free-entry equilibrium may be inefficiently low. This result is obtained even with set up costs and a price above marginal cost. We discuss the relevant implications that our result has for policy design.
Keywords: Free entry, Social welfare, Third-degree price discrimination, Oligopoly, Business stealing.
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Feb 17 2011 Manuscript Accepted : Dec 05 2011

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