Price Discrimination Bans on Dominant Firms
AbstractCompetition authorities and regulatory agencies sometimes impose pricing restrictions on firms with substantial market power â the âdominantâ 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 âhigher-prices-to-shelteredconsumersâ decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rivalâs profits, and may harm the dominant firmâs profits. We show that a ban on âhigher-prices-to-sheltered-consumersâ increases the dominant firmâs share of the first-period market. A ban on âlower-prices-to-rivalâs-customersâ decreases prices in the competitive segment, lowers the rivalâs profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on âlower-prices-to-rivalâscustomersâ, first-period competition is intensified substantially, which leads to lower prices âon-averageâ 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, Tilburg Law and Economic Center in its series Discussion Paper with number 2008-001.
Date of creation: 2008
Date of revision:
Contact details of provider:
Web page: http://www.tilburguniversity.nl/tilec/
Other versions of this item:
- Bouckaert, J.M.C. & Degryse, H.A. & Dijk, T. van, 2008. "Price Discrimination Bans on Dominant Firms," Discussion Paper 2008-3, Tilburg University, Center for Economic Research.
- Jan Bouckaert & Hans Degryse & Theon Van Dijk, 2008. "Price Discrimination Bans on Dominant Firms," CESifo Working Paper Series 2192, CESifo Group Munich.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-COM-2008-07-14 (Industrial Competition)
- NEP-MIC-2008-07-14 (Microeconomics)
- NEP-MKT-2008-07-14 (Marketing)
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.:
- 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.
- Yongmin Chen, 2008. "DYNAMIC PRICE DISCRIMINATION WITH ASYMMETRIC FIRMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 729-751, December.
- THISSE, Jacques-François & VIVES, Xavier, .
"On the strategic choice of spatial price policy,"
CORE Discussion Papers RP
-793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Bester, Helmut & Petrakis, Emmanuel, 1996.
"Coupons and oligopolistic price discrimination,"
International Journal of Industrial Organization,
Elsevier, vol. 14(2), pages 227-242.
- Mark Armstrong, 2005.
"Recent Developments in the Economics of Price Discrimination,"
- 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.
- Armstrong, M. & Vickers, J., 1992.
"Price Discrimination, Competition and Regulation,"
Economics Series Working Papers
99140, University of Oxford, Department of Economics.
- 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.
- 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.
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- 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.