Uniform Pricing as a Barrier to Entry |
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| Authors: | Hong Feng Youping Li Jie Shuai |
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| Institution: | 1. School of Economics and Management, Harbin Institute of Technology (Shenzhen), Shenzhen, 518055 China;2. School of Business and the Oliver Hart Research Center of Contracts and Governance, East China University of Science and Technology, 130 Meilong Road, Shanghai, 200237 China;3. Wenlan School of Business, Zhongnan University of Economics and Law, 182 Nanhu Avenue, East Lake High-Tech Development Zone, Wuhan, 430073 China |
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| Abstract: | This paper considers an entry game in which an incumbent firm operates in a number of markets and a potential entrant can enter multiple or all of the markets. While price discrimination has usually been thought of as a barrier to entry, in our model it is not and instead, charging a uniform price across the markets can discourage entry. Partial entry occurs when the two firms' products are highly substitutable. In this case, uniform pricing raises the profits of both the incumbent and the entrant but reduces consumer and total welfare relative to price discrimination. |
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| Keywords: | entry price discrimination uniform pricing |
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