Price competition between an expert and a non-expert
AbstractThis paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expertâs repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behaviour of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a âtimid-pricingâ equilibrium results. If the non-expertâs repair technology performs well enough, it pays for some consumers to disregard the non-expert. They directly go to the expertâs shop, and an âaggressive-pricingâ equilibrium results. For intermediate values of the non-expertâs successful repair a âmixed-pricingâ equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 18 (2000)
Issue (Month): 6 (August)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Bouckaert, J.M.C. & Degryse, H.A., 1998. "Price competition between an expert and a non-expert," Discussion Paper 1998-49, Tilburg University, Center for Economic Research.
- Bouckaert, Jan & Degryse, Hans, 1998. "Price Competition Between an Expert and a Non-Expert," CEPR Discussion Papers 1905, C.E.P.R. Discussion Papers.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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