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Bertrand Competition with an Asymmetric No-discrimination Constraint

Author

Listed:
  • Jan Bouckaert
  • Hans Degryse
  • Theon Dijk

Abstract

We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor's pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.
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Suggested Citation

  • Jan Bouckaert & Hans Degryse & Theon Dijk, 2013. "Bertrand Competition with an Asymmetric No-discrimination Constraint," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 62-83, March.
    • Handle: RePEc:bla:jindec:v:61:y:2013:i:1:p:62-83
    DOI: 10.1111/joie.2013.61.issue-1
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    Cited by:

    1. Christian Oertel & Armin Schmutzler, 2022. "Challenging the incumbent: Entry in markets with captive consumers and taste heterogeneity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 961-979, November.
    2. Hinnerk Gnutzmann, 2014. "Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare," DISCE - Working Papers del Dipartimento di Economia e Finanza def019, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Stefano Colombo, 2016. "Imperfect Behavior‐Based Price Discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 563-583, September.
    4. repec:ctc:serie1:def19 is not listed on IDEAS

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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