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Competition under non-linear pricing: the reselling solution with a public firm

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  • Maria Vagliasindi
  • Pierre A Vagliasindi

Abstract

This paper considers competition faced by an efficient public incumbent in a second degree price discrimination setting, where competitors' costs are private information. Our aim is to explore the implications brought by the introduction of a competitor allowed to price discriminate as a move towards deregulation. Our analysis shows the advantages of using regulation through the design of non-linear entry fees to make competition the most effective and efficient under asymmetric information on the entrant's cost. We also show how solutions, which do not interfere with socially optimal non-linear tariffs, can be obtained using the public reselling device, where the entrant's output is resold to customers by the incumbent.

Suggested Citation

  • Maria Vagliasindi & Pierre A Vagliasindi, 1998. "Competition under non-linear pricing: the reselling solution with a public firm," Edinburgh School of Economics Discussion Paper Series 31, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:31
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