A common practice among utility companies is to offer discounts to consumers who use a rival's services in an attempt to induce them to switch suppliers. This chapter examines a two-period model of price competition on a Hotelling line that captures this type of price discrimination. In the...

If there is price discrimination, at least one of the prices is not equal to marginal cost. Therefore, if there is price discrimination, there must be market power. While this logic is sound, it has led many policy-makers to believe that price discrimination and market power are positively...