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Uniform Pricing as a Barrier to Entry

20 Pages Posted: 16 Nov 2017  

Hong Feng

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management

Youping Li

East China University of Science and Technology (ECUST)

Jie Shuai

Zhongnan University of Economics and Law

Date Written: August 2, 2017

Abstract

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

Feng, Hong and Li, Youping and Shuai, Jie, Uniform Pricing as a Barrier to Entry (August 2, 2017). Available at SSRN: https://ssrn.com/abstract=3070750

Hong Feng

Southwestern University of Finance and Economics (SWUFE) - Research Institute of Economics & Management ( email )

55 Guanghuacun Street
Chengdu, Sichuan 610074
China

Youping Li (Contact Author)

East China University of Science and Technology (ECUST) ( email )

Shanghai
China

Jie Shuai

Zhongnan University of Economics and Law ( email )

182 Nanhu Ave.
East Lake High-tech Development Zone
Wuhan, Hubei 430073
China

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