Input Third-degree Price Discrimination in Transport Markets
Documento de Trabajo IE-PUC, N° 499, 2017.
Abstract: We study the efficiency of input third-degree price discrimination in transport markets. Relevant cases are transport facilities such as airports, seaports and railway stations that sell access to the infrastructure to downstream firms. The two key distinctive features of these markets are the presence of negative consumption externalities and of public ownership (domestic-welfare maximizing sellers). We find that each of these features enlarges the extent to which input price discrimination is desirable. Our main result suggests that the current practice of enforcing a ban on input price discrimination by congestible facilities may be in place at the cost of efficiency.