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Nonlinear pricing in spatial oligopoly

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  • HAMILTON , Jonathan
  • THISSE , Jacques-François

    ()
    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

A model of duopoly competition in nonlinear pricing when firms are imperfectly informed about consumer locations is analyzed. A continuum of consumers purchase a variable amount of a product from one of two firms located at the endpoints of the market. At the Nash equilibrium in quantity-outlay schedules, consumers buy the same quantities as they would from the same firm if it were a monopolist facing the same informational asymmetries, but they receive greater surplus. Hence, no efficiency gains result from competition. If consumers have the option to reveal their locations and have the firms deliver the goods, all consumers choose to reveal their locations in equilibrium. Thus, the inefficiencies from information asymmetries may not arise because firms can deliver the good to consumers. In contrast, with a monopoly seller, consumers have no incentives to reveal their locations.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1996066.

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Date of creation: 01 Dec 1996
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Handle: RePEc:cor:louvco:1996066

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Keywords: competing principals -nonlinear pricing - spatial competition;

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References

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  1. Coyte, Peter C & Lindsey, C Robin, 1988. "Spatial Monopoly and Spatial Monopolistic Competition with Two-Part Pricing," Economica, London School of Economics and Political Science, vol. 55(220), pages 461-77, November.
  2. HAMILTON, Jonathan & THISSE, Jacques-François, . "Duopoly with spatial and quantity-dependent price discrimination," CORE Discussion Papers RP -998, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826, October.
  4. THISSE, Jacques-François & VIVES, Xavier, . "On the strategic choice of spatial price policy," CORE Discussion Papers RP -793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-62, Winter.
  6. Spulber, Daniel F, 1981. "Spatial Nonlinear Pricing," American Economic Review, American Economic Association, vol. 71(5), pages 923-33, December.
  7. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
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Cited by:
  1. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," Microeconomics 0409006, EconWPA.

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