Abstract
There is no widely accepted definition of price discrimination with differentiated products. Either absolute price‐cost differences or percentage price‐cost markups are used as benchmarks for comparison. I show that the two criteria are qualitatively different: One may indicate price discrimination when the other does not. Moreover, anything other than marginal cost pricing will be identified as price discrimination by at least one of the two. I propose choosing a criterion based on the cost of arbitrage in the market under examination. Because this is often difficult to determine, it is advisable to always report results with both measures.
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