Information exchange through non-binding advance price announcements: an antitrust analysis

Information exchange through non-binding advance price announcements: an antitrust analysis We study the welfare effects of non-binding advance price announcements. Applying a simulation-based approach in a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that—although non-binding advance price announcements may raise competition concerns—in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Journal of Law and Economics Springer Journals

Information exchange through non-binding advance price announcements: an antitrust analysis

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Publisher
Springer Journals
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Law and Economics; European Integration; Public Finance; Commercial Law
ISSN
0929-1261
eISSN
1572-9990
D.O.I.
10.1007/s10657-016-9549-9
Publisher site
See Article on Publisher Site

Abstract

We study the welfare effects of non-binding advance price announcements. Applying a simulation-based approach in a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that—although non-binding advance price announcements may raise competition concerns—in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare.

Journal

European Journal of Law and EconomicsSpringer Journals

Published: Oct 21, 2016

References

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