The degree of distortions under second-degree price discrimination

- We consider second-degree price discrimination for two types of consumers.
- No consumer will be excluded when valuation functions cross at a positive quantity.
- The type with the higher valuation peak is always served at the efficient quantity.
- The sufficient and necessary condition for overall efficiency is provided.
- For two general linear demands, we quantify the degree of distortions.

Under second-degree price discrimination, both types of consumers get efficient quantities when the net-of-cost valuation functions intersect at least once at some positive quantity and the point of intersection lies between the two peaks. Distortions can be upward or downward.