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-sheltered-consumersâ 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-rivalâs-customersâ, 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:
- Jan Bouckaert & Hans Degryse & Theon Van Dijk, 2008. "Price Discrimination Bans on Dominant Firms," CESifo Working Paper Series 2192, CESifo Group Munich.
- 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.
- 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.:
- 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).
- 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.
- Armstrong, Mark & Vickers, John, 1993.
"Price Discrimination, Competition and Regulation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 41(4), pages 335-59, December.
- Bester, H. & Petrakis, E., 1994.
"Coupons and Oligopolistic Price Discrimination,"
1994-12, Tilburg University, Center for Economic Research.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Yongmin Chen, 2008. "DYNAMIC PRICE DISCRIMINATION WITH ASYMMETRIC FIRMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 729-751, December.
- Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
- 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.
- 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) The email address of this maintainer does not seem to be valid anymore. Please ask Richard Broekman to update the entry or send us the correct address.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.