Input price discrimination (bans), entry and welfare
Markus Dertwinkel-Kalt (),
Justus Haucap () and
Christian Wey ()
No 99, DICE Discussion Papers from University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
Katz (1987), DeGraba (1990), and Yoshida (2000) have formulated theories that price discrimination bans in intermediary goods markets tend to have positive effects on allocative, dynamic and productive efficiency, respectively. We show that none of these results is robust vis-à-vis endogenous changes in downstream market structure. An upstream monopolist's ability to price discriminate can intensify competition through entry (by a technically inefficient entrant), resulting in socially preferable market outcomes. In contrast, discrimination bans tend to blockade entry of relatively inefficient firms , thereby strengthening downstream market concentration.
JEL-codes: L13 D43 K31 (search for similar items in EconPapers)
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