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.Dominant firms;price discrimination;competition policy;regulation

Price Discrimination Bans on Dominant Firms

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-shelteredconsumers” decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rival’s profits, and may harm the dominant firm’s profits. We show that a ban on “higher-prices-to-sheltered-consumers” increases the dominant firm’s share of the first-period market. A ban on “lower-prices-to-rival’s-customers” decreases prices in the competitive segment, lowers the rival’s profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on “lower-prices-to-rival’scustomers”, 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.dominant firms;price discrimination;competition policy;regulation

Enhancing Market Power by Reducing Switching Costs

Bouckaert, J.M.C.

Complex band structure and plasmon lattice Green's function of a periodic metal-nanoparticle chain

When the surface plasmon resonance in a metal-nanoparticle chain is excited at one point, the response signal will generally decay down the chain due to absorption and radiation losses. The decay length is a key parameter in such plasmonic systems. By studying the plasmon lattice Green's function, we found that the decay length is generally governed by two exponential decay constants with phase factors corresponding to guided Bloch modes and one power-law decay with a phase factor corresponding to that of free space photons. The results show a high level of similarity between the absorptive and radiative decay channels. By analyzing the poles (and the corresponding residues) of the Green's function in a transformed complex reciprocal space, the dominant decay channel of the real-space Green's function is understood.Comment: 19 pages, 3 figure