Monopolistic third-degree price discrimination, customer’s patience and welfare

Consumers are strategic; they choose whether to buy products now or later. In a two-period game-theoretical model, we examine the effects of third-degree price discrimination on the market, as well as the role of consumer patience in shaping these effects. When product quality is endogenous, we find that third-degree price discrimination will bring higher consumer surplus and social welfare if consumer patience is high. When the quality is exogenous, we find that third-degree price discrimination increases firm profit, and reduces consumer surplus and social welfare. The consumer patience will reduce the effect of third-degree price discrimination. This paper expands the theoretical research on the effect of third-degree price discrimination on the market from the perspective of consumer behavior.