Bertrand Competition with an Asymmetric No-Discrimination Constraint

J.M.C. Bouckaert, H.A. Degryse, T. van Dijk

Research output: Working paperDiscussion paperOther research output

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Abstract

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 behaviour-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.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Number of pages24
Volume2012-004
Publication statusPublished - 2012

Publication series

NameTILEC Discussion Paper
Volume2012-004

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Bertrand competition
Discrimination
Regulatory policy
Rivalry
Third-degree price discrimination
Price discrimination
Competitors
Pricing policy
Profit
Uniform pricing

Keywords

  • Dominant firms
  • price discrimination
  • competition policy
  • regulation

Cite this

Bouckaert, J. M. C., Degryse, H. A., & van Dijk, T. (2012). Bertrand Competition with an Asymmetric No-Discrimination Constraint. (TILEC Discussion Paper; Vol. 2012-004). Tilburg: TILEC.
Bouckaert, J.M.C. ; Degryse, H.A. ; van Dijk, T. / Bertrand Competition with an Asymmetric No-Discrimination Constraint. Tilburg : TILEC, 2012. (TILEC Discussion Paper).
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Bouckaert, JMC, Degryse, HA & van Dijk, T 2012 'Bertrand Competition with an Asymmetric No-Discrimination Constraint' TILEC Discussion Paper, vol. 2012-004, TILEC, Tilburg.

Bertrand Competition with an Asymmetric No-Discrimination Constraint. / Bouckaert, J.M.C.; Degryse, H.A.; van Dijk, T.

Tilburg : TILEC, 2012. (TILEC Discussion Paper; Vol. 2012-004).

Research output: Working paperDiscussion paperOther research output

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AB - 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 behaviour-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.

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Bouckaert JMC, Degryse HA, van Dijk T. Bertrand Competition with an Asymmetric No-Discrimination Constraint. Tilburg: TILEC. 2012. (TILEC Discussion Paper).