Third-degree Price Discrimination In Vertically-Correlated Market

A systematic mathematics analysis (game theory)was presented on third -degree price discrimination. On the basis of quantitative analysis, we got some qualitative conclusions. What the model of this text consider is monopolist and dealer in two different markets of two regions with different demand elasticity.We studied the method and characteristics of third-degree price discrimination . The concrete contents is as follows: Firstly,We studied it without price discrimination , Namely the price of two regions are same, in order to compare it with next Situations; Secondly,We studied and compared the dynamic games of monopolist and a dealer on third-degree price discrimination under the condition of linear demand functions, and compute the profits of monopolist and a dealer ;Thirdly,We studied and compared the complete and perfect information dynamic games of monopolist and oligarchic dealer on third-degree price discrimination under the condition of linear demand functions, producer and dealers ,dealer 1 and dealer 2 are both complete and perfect information dynamic game; and it expands further to the situation of n dealers, explains betterly the variety of the social welfare caused by the strengthened competition; Fourly,consider the Cooperation of firm and dealer, and compared the profits and consumer surplus in all situation. There are three results: 1. The social welfare in third-degree price discrimination is not bad than it without price discrimination;2.In highly competitive markets, consumer's surplus is more and producer's profit is less; while in markets that have more monopoly, consumer's surplus is less and producer's profits is more.3.In the situation of cooperation, producer and dealer's profits are more, consumer's surplus is more too.