Three essays on price discrimination

The first essay analyzes a unifying spatial price discrimination model which encompasses the two most studied paradigms of two-group and perfect discrimination as special cases. Firms use the available information to classify the consumers into different groups. The number of identifiable consumer segments increases with the information quality. Among our findings: (i) when the information quality is low, a unilateral commitment not to price discriminate arises in equilibrium, (ii) after a unique threshold of information precision such a commitment is a dominated strategy and the game becomes a prisoners' dilemma and (iii) equilibrium profits exhibit a U-shape relationship with the information quality.; The second essay investigates a circular model with price discrimination based on various qualities of consumer information. We show that the free-entry equilibrium entails an excessive number of firms irrespective of the information quality. Interestingly, the equilibrium number of firms is non-monotonic (a U-shape pattern) as a function of the information quality. No information (uniform pricing) results in the most excessive entry. Price discrimination reduces the equilibrium number of firms in the market and improves efficiency. Moderate level of information quality minimizes the difference between the social optimum and the free-entry equilibrium.; The third essay investigates the effect of market structure on price dispersion using data from the U.S. airline industry. We extend the literature by: (i) positing a second-degree oligopolistic price discrimination model and testing its predictions, (ii) introducing a scale variant measure of dispersion (the standard deviation). Our results suggest that there is an inverse U-shaped relationship between market concentration (measured by Herfindahl-Hirschman Index---HHI) and price dispersion with the latter measured by the Gini coefficient. On the other hand, the relationship between the HHI and the standard deviation of prices (STD) is monotonic and positive. Both of these results are consistent with the predictions of the theoretical model. To the best of our knowledge, this is the first study which confirms the predictions of such a model in an industry known to be replete with second-degree price discrimination.