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

See all articles by Jan Bouckaert

Jan Bouckaert

University of Antwerp - Department of Economics

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Theon van Dijk

Lexonomics

Multiple version iconThere are 3 versions of this paper

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

Bouckaert, Jan and Degryse, Hans and Dijk, Theon van, Bertrand Competition with an Asymmetric No-Discrimination Constraint (January 18, 2012). TILEC Discussion Paper No. 2012-004. Available at SSRN: https://ssrn.com/abstract=1991698 or http://dx.doi.org/10.2139/ssrn.1991698

Jan Bouckaert (Contact Author)

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium
+32 3 220 4055 (Phone)

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Theon van Dijk

Lexonomics ( email )

Grensstraat 81
Brussels, 1970
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
2,319
PlumX Metrics