The Welfare Losses from Price-Matching Policies
Several 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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Volume (Year): 47 (1999)
Issue (Month): 2 (June)
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References listed on IDEAS
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.:
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- Christie William G. & Huang Roger D., 1994. "Market Structures and Liquidity: A Transactions Data Study of Exchange Listings," Journal of Financial Intermediation, Elsevier, vol. 3(3), pages 300-326, June.
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