An Essay on Price Discrimination

Abstract

The modern theory of price discrimination began with the work of Pigou (1920). Joan Robinson devoted two chapters of her book The Economics of Imperfect Competition (1969) to the problem of (‘third degree’) price discrimination. Her account examines the conditions that make price discrimination possible, presents a graphical analysis of the discriminating monopolist’s pricing decision which has become the standard textbook treatment, and ends with an inquiry into the consequences of price discrimination for both allocative efficiency and distributional equity. Although Pigou’s and Robinson’s contributions have proved of lasting value, the theory of price discrimination has by no means remained unaltered.¹