24 Pages Posted: 1 Feb 2012
Date Written: 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.
JEL Classification: D11
Suggested Citation: Suggested Citation
Bouckaert, Jan and Degryse, Hans and Dijk, Theon van, Bertrand Competition with an Asymmetric No-Discrimination Constraint (January 18, 2012). Available at SSRN: https://ssrn.com/abstract=1996428 or http://dx.doi.org/10.2139/ssrn.1996428