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

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

Keywords

  • Dominant firms
  • price discrimination
  • competition policy
  • regulation

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