Bertrand competition with an asymmetric no-discrimination constraint
Faculty of Applied Economics
Antwerp :UA, 2012
Research paper / UA, Faculty of Applied Economics ; 2012:006
University of Antwerp
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.