Second-degree price discrimination by Japanese newspapers

In Japan, the newspaper publishers with the greatest daily circulation offer both morning and evening editions in most of their distribution areas, and many of them allow their customers to choose between morning-only and morning-and-evening subscriptions. Each such newspaper publisher, in setting the subscription prices and numbers of pages of content in its morning edition and evening edition, must take into account self-selection of demanders as to type of subscription. The subscription offerings thus amount to second-degree price discrimination, which is the main reason why it might be profitable to even publish an evening edition along with the morning one. Estimates here show that the Japanese newspaper publishers that do offer optional evening editions enlarge their profits by around eight percent of their morning-edition subscription revenue. Furthermore, these newspaper publishers increase consumer surplus by an amount equal to half what they add their own profit. The second-degree price discrimination increases social welfare.