Price Discrimination Bans on Dominant Firms
AbstractCompetition authorities and regulatory agencies sometimes impose pricing restrictions on firms with substantial market power — the “dominant” firms. We analyze the welfare effects of a ban on behaviour-based price discrimination in a two-period setting where the market displays a competitive and a sheltered segment. A ban on “higher-prices-to-shelteredconsumers” decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rival’s profits, and may harm the dominant firm’s profits. We show that a ban on “higher-prices-to-sheltered-consumers” increases the dominant firm’s share of the first-period market. A ban on “lower-prices-to-rival’s-customers” decreases prices in the competitive segment, lowers the rival’s profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on “lower-prices-to-rival’scustomers”, first-period competition is intensified substantially, which leads to lower prices “on-average” over the two periods. Our findings indicate that a dynamic two-period analysis may lead to conclusions opposite to those drawn from a static one-period analysis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-3.
Date of creation: 2008
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
dominant firms; price discrimination; competition policy; regulation;
Other versions of this item:
- Jan Bouckaert & Hans Degryse & Theon Van Dijk, 2008. "Price Discrimination Bans on Dominant Firms," CESifo Working Paper Series 2192, CESifo Group Munich.
- Degryse, H.A., 2008. "Price Discrimination Bans on Dominant Firms," Discussion Paper 2008-001, Tilburg University, Tilburg Law and Economic Center.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-19 (All new papers)
- NEP-BEC-2008-01-19 (Business Economics)
- NEP-COM-2008-01-19 (Industrial Competition)
- NEP-IND-2008-01-19 (Industrial Organization)
- NEP-MIC-2008-01-19 (Microeconomics)
- NEP-MKT-2008-01-19 (Marketing)
- NEP-REG-2008-01-19 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Armstrong, M. & Vickers, J., 1992.
"Price Discrimination, Competition and Regulation,"
Economics Series Working Papers
99140, University of Oxford, Department of Economics.
- Bester, H. & Petrakis, E., 1994.
"Coupons and Oligopolistic Price Discrimination,"
1994-12, Tilburg University, Center for Economic Research.
- Armstrong, Mark, 2006.
4693, University Library of Munich, Germany.
- Armstrong, M, 2008. "Price Discrimination," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Thisse, J.-F. & Vives, X., 1987.
"On the strategic choice of spatial price policy,"
CORE Discussion Papers
1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Armstrong, M., 2006.
"Recent developments in the economics of price discrimination,"
Open Access publications from University College London
http://discovery.ucl.ac.u, University College London.
- Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA.
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- Yongmin Chen, 2008. "DYNAMIC PRICE DISCRIMINATION WITH ASYMMETRIC FIRMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 729-751, December.
- Phlips, Louis & Moras, Ireneo Miguel, 1993. "The AKZO Decision: A Case of Predatory Pricing?," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 315-21, September.
- Huw Dixon & Joshy Easaw, 2001. "Strategic Responses to Regulatory Policies: What Lessons Can Be Learned from the U.K. Contract Gas Market?," Review of Industrial Organization, Springer, vol. 18(4), pages 379-396, June.
- Oz Shy & Rune Stenbacka, 2011. "Customer recognition and competition," Working Papers 11-7, Federal Reserve Bank of Boston.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman).
If references are entirely missing, you can add them using this form.