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Bertrand Competition with an Asymmetric No-Discrimination ConstraintJan BouckaertUniversity of Antwerp - Department of Economics Hans DegryseKU Leuven - Faculty of Business and Economics (FBE); Centre for Economic Policy Research (CEPR); CentER, European Banking Center (EBC), TILEC, Tilburg University Theon Van DijkLexonomics January 18, 2012 TILEC Discussion Paper No. 2012-004 CentER Discussion Paper No. 2012-009 Abstract: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behavior-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.
Number of Pages in PDF File: 24 Keywords: dominant firms, price discrimination, competition policy, regulation JEL Classification: D11 working papers seriesDate posted: January 25, 2012 ; Last revised: February 1, 2012Suggested CitationContact Information
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