Yuncheol Jeong () (Faculty of Business and Commerce, Keio University) Masayoshi Maruyama () (Graduate School of Business Administration, Kobe University)
Abstract
This paper examines the equilibrium incentive for firms to use behavior-based price discrimination in a duopoly market with exogenous switching costs. We find that if there is a large difference in the existing market shares between two firms, then discriminatory pricing is a unique Nash equilibrium. Otherwise, there are three Nash equilibria: both firms engage in discriminatory pricing, or engage in uniform pricing, or engage in mixed strategies. The respective firms are worse off in the discriminatory equilibrium compared with the others.
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance D4 - Microeconomics - - Market Structure and Pricing
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