Input Price Discrimination, Demand Forms, and Welfare

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We analyse the effects of input price discrimination in the canonical model where an upstream monopolist sells to downstream firms with various degrees of efficiency. We first recast a series of existing results within our setting,  extending previous findings related to discrimination in final-goods markets to the case of  discrimination in input markets. Then, we examine the impact of input price discrimination on  welfare. A key determinant of the effects of input price discrimination corresponds to the sum of demand curvature and pass-through elasticity. We provide  examples relying on derived demands with constant curvature, including demands with constant pass-through rates.