Entry Decision and Pricing Policies
We extend the analysis of the impact of firms' pricing policies upon entry to a framework where price competition and differentiated products are present. We consider a model where an incumbent serves two distinct and independent geographical markets and an entrant may enter in one of the markets. Entry under discriminatory pricing is more likely than under uniform pricing when entry is profitable under discriminatory pricing but unprofitable under uniform pricing. Our results show entry under discriminatory pricing may be more, less or equally likely than under uniform pricing. We show that the degree of product substitutability affects the impact of pricing policies upon entry decision.
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- Azar Ofer H, 2003.
"Can Price Discrimination be Bad for Firms and Good for All Consumers? A Theoretical Analysis of Cross-Market Price Constraints with Entry and Product Differentiation,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 3(1), pages 1-19, September.
- Azar, Ofer H., 2002. "Can Price Discrimination be Bad for Firms and Good for All Consumers? A Theoretical Analysis of Cross-Market Price Constraints with Entry and Product Differentiation," MPRA Paper 4575, University Library of Munich, Germany.
- Armstrong, Mark & Vickers, John, 1993.
"Price Discrimination, Competition and Regulation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 41(4), pages 335-359, December.
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- Cheung, Francis K. & Wang, X. Henry, 1999. "A note on the effect of price discrimination on entry: Research note," Journal of Economics and Business, Elsevier, vol. 51(1), pages 67-72, January.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, October.
- Aguirre, Inaki & Espinosa, Maria Paz & Macho-Stadler, Ines, 1998. "Strategic entry deterrence through spatial price discrimination," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 297-314, May.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
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