Bertrand Competition with an Asymmetric No-Discrimination Constraint
University of Antwerp - Department of Economics
KU Leuven - Faculty of Business and Economics (FBE); Centre for Economic Policy Research (CEPR); CentER, European Banking Center (EBC), TILEC, Tilburg University
Theon Van Dijk
January 18, 2012
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 profi ts 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
JEL Classification: D11working papers series
Date posted: February 1, 2012
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