The Welfare Losses from Price-Matching Policies
AbstractSeveral recent papers argue that price-matching policies raise equilibrium prices. The authors add to this literature by considering potential welfare losses, which have two sources: Harberger triangles from high prices and Posner rectangles from overentry. They compare price-matching markets with entry to monopoly and price-matching markets without entry, and find that price matching with entry creates greater welfare losses than monopoly in markets with a low ratio of fixed to marginal cost. The authors illustrate this result using parameters from the U.S. wholesale gasoline and air travel markets and relate their model to price matching among NASDAQ marketmakers. Copyright 1999 by Blackwell Publishing Ltd
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 47 (1999)
Issue (Month): 2 (June)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
Other versions of this item:
- Aaron S. Edlin & Eric R. Emch, 1998. "The Welfare Losses from Price Matching Policies," Law and Economics 9803001, EconWPA, revised 26 May 1998.
- Aaron S. Edlin and Eric R. Emch., 1997. "The Welfare Losses from Price Matching Policies," Economics Working Papers 97-257, University of California at Berkeley.
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- D60 - Microeconomics - - Welfare Economics - - - General
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