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Bertrand Competition with an Asymmetric No-Discrimination Constraint

Author

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  • Bouckaert, J.M.C.
  • Degryse, H.A.

    (Tilburg University, School of Economics and Management)

  • van Dijk, T.

Abstract

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

  • Bouckaert, J.M.C. & Degryse, H.A. & van Dijk, T., 2012. "Bertrand Competition with an Asymmetric No-Discrimination Constraint," Other publications TiSEM c988f711-642c-423d-9801-2, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiutis:c988f711-642c-423d-9801-21cca10272dc
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    References listed on IDEAS

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    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).
    3. Christian Oertel & Armin Schmutzler, 2021. "Challenging the incumbent: entry in markets with captive consumers and taste heterogeneity," ECON - Working Papers 386, Department of Economics - University of Zurich.
    4. Stefano Colombo, 2016. "Imperfect Behavior‐Based Price Discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 563-583, September.

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    JEL classification:

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

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