Natalie Chen, Luciana Juvenal, 01 May 2020

Does price discrimination of exporters depend on trade costs and/or product quality? Using firm-level data, this column investigates how exporters adjust their markups across destinations depending on trade costs – such as tariffs and bilateral distance – and the quality of their exports. The theoretical and empirical evidence shows that exporters raise markups in more distant markets but lower them in countries with higher tariffs. However, the response of markups to changes in trade costs is heterogeneous and smaller in magnitude for higher quality exports.

Michael Kremer, Christopher Snyder, Fanele Mashwama, 10 May 2019

Consumers pay more for many pharmaceuticals in the US than in most other countries. This column investigates the welfare implications of such price discrimination using demand curves for HIV pharmaceuticals. A ban on price discrimination exacerbates the potentially large deadweight loss in the market for either a drug or a vaccine. However, this loss is ameliorated by a small government subsidy.

Fabian Herweg, Daniel Müller, 07 April 2015

Manufacturers discriminating among retailers is an important issue in competition policy. Specifically, the EU allows quantity discounts but forbids discriminatory discounts – a policy that does not jive with standard economic analysis which suggests that banning price discrimination improves allocative efficiency and typically also raises overall welfare. This column argues that the research – and the recommendations that flow from it – are based on excessively restrictive assumptions. When there are nonlinear wholesale contracts, e.g. quantity discounts, the presence of private information can reverse the standard analysis in a way that supports the EU’s policy. 

Ian Fillmore, 04 March 2015

Colleges in the US charge high sticker prices but routinely offer discounts to individual students. This column presents research showing that colleges use a student’s federal aid form to learn about willingness-to-pay and to engage in substantial price discrimination in a way that amounts to a tax on income, with the primary effect of increasing tuition revenues. Nevertheless, the price discrimination also results in some redistribution to low-income students as well as a modest increase in student–college match quality.

Joshua Gans, 11 June 2014

Netflix recently agreed to pay Comcast for faster access to Comcast’s customers, intensifying the debate over ‘net neutrality’ – the principle that internet service providers should treat all data equally. This column argues that without net neutrality regulation, ISPs can capture the benefits of higher-quality content, thereby discouraging innovation from content providers. To be effective, net-neutrality regulation must prevent content-based price discrimination on both sides of the market.

Pascal Courty, Mario Pagliero, 04 February 2009

Is the music business doing business well? This column shows that offering multiple seating categories at concerts raises revenues by about 5%. But a quarter of concerts do not price discriminate, and most only offer two ticket types. The music industry seems to be leaving money on the concert floor.

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