This paper finds that third-degree price discrimination (local store pricing) in supermarkets more often decreases output and welfare compared to uniform pricing. This contradicts the common belief that price discrimination benefits consumers. Using output as a proxy for welfare overestimates the benefits and underestimates the potential harm of price discrimination.

The author acknowledges support by the National Science Foundation, but no other potential conflicts of interest are identified.

This paper makes a valuable contribution to the literature on price discrimination by providing empirical evidence challenging the long-held view that third-degree price discrimination is generally beneficial. The methodology is rigorous, involving nonparametric estimation of demand and evaluation of curvature conditions. While the simplified model and limited generalizability are weaknesses, the scale of the analysis and the robustness of the findings across product categories make this a strong study.