Most-Favoured-Customer Pricing Policy as an Entry Deterrence Device

ASSET - Instituto De Economia Publica from ASSET (Association of Southern European Economic Theorists)

Abstract: The paper is concerned with the effects upon competition of most-favored-customer pricing policy. We consider a model where a multimarket incumbent firm faces a threat of entry in one of its two markets. We show that most-favored-customer clauses, or the commitment to uniform pricing, may change the post-entry competition to the advantage of the incumbent whether it is played according to Cournot or Bertrand rules.

Keywords: PRICING; CONSUMPTION; BUSINESS ORGANIZATION (search for similar items in EconPapers)
JEL-codes: E21 D21 (search for similar items in EconPapers)
Date: 1997

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