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Bertrand Competition with an Asymmetric No-Discrimination Constraint

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

    (Tilburg University, School of Economics and Management)

  • van Dijk, T.

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 ec87caff-783c-4c39-ab2b-0, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:ec87caff-783c-4c39-ab2b-0706942be642
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    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, 2022. "Challenging the incumbent: Entry in markets with captive consumers and taste heterogeneity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 961-979, November.
    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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