Economic Literature on Price Discrimination and its Application to the Uniform Pricing of Gasoline

Abstract

This article summarizes much of the literature on price discrimination, discussing the alterative approaches and the general conclusions on price discrimination's impact on output, prices, and welfare. It applies lessons from the literature to a specific proposal that would eliminate arbitrage in California wholesales gasoline markets, and in effect prevent some forms of price discrimination. It concludes that applying extensions of the existing models to industry data is very important for gaining a better understanding of the implications price discrimination, and the current debate on price dispersion would benefit from such research.