Most-Favoured-Customer Pricing Policy as an Entry Deterrence Device
The paper is concerned with the effects upon competition of most-favored-customer pricing policy. We consider a model where a multimarket incumbent firm faces a threat of entry in one of its two markets. We show that most-favored-customer clauses, or the commitment to uniform pricing, may change the post-entry competition to the advantage of the incumbent whether it is played according to Cournot or Bertrand rules.
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