Measuring Market Power When Firms Price Discriminate


We propose a conduct parameter based market power measure within a model of price discrimination, extending work by Hazledine (2006) and Kutlu (2012) to certain forms of third degree price discrimination. We use our model to estimate the market power of U.S. airlines in a price discrimination environment. Market power estimates from our single-price conduct model are larger than those estimated from the standard price discrimination model.