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Bertrand competition with an asymmetric no-discrimination constraint

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  • BOUCKAERT, Jan
  • DEGRYSE, Hans
  • VAN DIJK; Theon

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.

Suggested Citation

  • BOUCKAERT, Jan & DEGRYSE, Hans & VAN DIJK; Theon, 2012. "Bertrand competition with an asymmetric no-discrimination constraint," Working Papers 2012006, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2012006
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    References listed on IDEAS

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    1. Armstrong, Mark & Porter, Robert, 2007. "Preface to the Handbook of Industrial Organization, Volume 3," Handbook of Industrial Organization, Elsevier.
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    3. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
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    Cited by:

    1. repec:ctc:serie1:def19 is not listed on IDEAS
    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).

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    JEL classification:

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

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