Third-Degree Price Discrimination and Consumer Surplus

This paper presents simple conditions for monopoly third-degree price discrimination to have negative or positive effects on aggregate consumer surplus.� Consumer surplus is often reduced by discrimination, for example when total welfare (consumer surplus and profits) falls.� Surplus increases with discrimination, however, in two cases: first, when the marginal revenues without discrimination are close together and inverse demand in the market where the price will fall with discrimination is more convex; second, when inverse demand functions are highly convex and the discriminatory prices are close together.Third-degree price discrimination, Monopoly, Consumer surplus