Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, March 21, 2012

Bertrand Competition with an Asymmetric No-Discrimination Constraint

Posted by D. Daniel Sokol


J.M.C. Bouckaert, H.A. Degryse and T. van Dijk (Tilburg University, Center for Economic Research) explore Bertrand Competition with an Asymmetric No-Discrimination Constraint.

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.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/03/bertrand-competition-with-an-asymmetric-no-discrimination-constraint-1.html

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