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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26237
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| Title: | | Price discrimination bans on dominant firms  |
| Authors: | | Bouckaert, Jan Degryse, Hans Dijk, Theon van |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2192 |
| Abstract: | | Competition authorities and regulatory agencies sometimes impose pricing restrictions on firms with substantial market power the dominant firms. We analyze the welfare effects of a ban on behaviour-based price discrimination in a two-period setting where the market displays a competitive and a sheltered segment. A ban on higher-prices-to-sheltered-consumers decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rivals profits, and may harm the dominant firms profits. We show that a ban on higher-prices-to-sheltered-consumers increases the dominant firms share of the first-period market. A ban on lower-prices-to-rivals-customers decreases prices in the competitive segment, lowers the rivals profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on lower-prices-to-rivals-customers, first-period competition is intensified substantially, which leads to lower prices on-average over the two periods. Our findings indicate that a dynamic two-period analysis may lead to conclusions opposite to those drawn from a static one-period analysis. |
| Subjects: | | dominant firms price discrimination competition policy regulation |
| JEL: | | D11 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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