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AbstractPrice discrimination by consumer's purchase history is widely used in regulated industries, such as communication or utilities, both by incumbents and entrants. I show that such discrimination can have surprisingly negative welfare effects -even though prices and industry profits fall, so does consumer surplus. Earlier studies that did not allow entrants to discriminate or assumed symmetric firms yielded sharply different results, the pro-competitive effect of price discrimination are stronger in these settings. Imposing a pricing constraint on incumbent's discrimination leads the entrant to discriminate more heavily, but still improves both consumer and producer welfare.
What drives the resilience of markets to disasters? We study syndicates, a form of legal cartel that assigns market share based on production capacity. This creates incentives for excess capacity investment, and may insulate the market from the impact of extreme events. The potash industry, controlled by a syndicate and subject to mine disasters generating exogenous capacity shocks, provides an ideal setting for testing the hypothesis. We find evidence suggesting that even large capacity losses—averaging 3% of global capacity—do not cause production shortfalls or a price response. Such resilience is not observed in more competitive commodity markets.
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