Bertrand Competition with an Asymmetric No-Discrimination Constraint
TILEC Discussion Paper No. 2012-004
CentER Discussion Paper No. 2012-009
24 Pages Posted: 25 Jan 2012 Last revised: 1 Feb 2012
There are 2 versions of this paper
Bertrand Competition with an Asymmetric No-Discrimination Constraint
Bertrand Competition with an Asymmetric No-Discrimination Constraint
Date Written: January 18, 2012
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.
Keywords: dominant firms, price discrimination, competition policy, regulation
JEL Classification: D11
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints
By Tommaso M. Valletti, Steffen Hoernig, ...
-
Game Theory and Industrial Organization
By Kyle Bagwell and Asher Wolinsky
-
Express Delivery and the Postal Sector in the Context of Public Sector Anti-Competitive Practices
-
By Susan Athey