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Bertrand competition with an asymmetric no-discrimination constraint

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We study the competitive and welfare consequences when only one …rm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmet- ric 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 …nd that an asymmetric no-discrimination constraint only leads to higher pro…ts for the unconstrained …rm 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 monop- olistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.
Series: Research paper / UA, Faculty o
Number of pages: 23
Publication year:2012
  • Handle: 10067/1017410151162165141