Uniform Pricing as a Barrier to Entry
20 Pages Posted: 16 Nov 2017
Date Written: August 2, 2017
This paper considers an entry game in which an incumbent firm operates in a number of markets and a potential entrant seeks to enter some or all of the markets. While price discrimination has usually been thought of as a barrier to entry, in our model it is not and, on the contrary, we find that charging a uniform price across the markets actually discourages entry. Partial entry occurs when the two firms’ products are highly substitutable. In this case, a ban on price discrimination raises the profits of both the incumbent and the entrant but reduces consumer and total welfare.
Keywords: Entry; Price Discrimination; Uniform Pricing
JEL Classification: L1; D4
Suggested Citation: Suggested Citation