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Price Discrimination in Oligopoly: Evidence from Swedish Newspapers

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  • Asplund, Björn Marcus
  • Eriksson, Rickard
  • Strand, Niklas

Abstract

This Paper provides an empirical examination of third-degree price discrimination in the Swedish newspaper industry. The results show that price discrimination is more prevalent in competitive markets and among newspapers with low market shares. This supports predictions from recent theoretical work, including Chen (1997) and Fudenberg and Tirole (2000), that suggest that firms attempt to poach consumers from rivals by offering targeted discounts. In addition, we find weak evidence that newspapers in markets with large inflows of new consumers and those covering wide geographical areas offer more discounts.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3269.

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Date of creation: Mar 2002
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Handle: RePEc:cpr:ceprdp:3269

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Keywords: newspapers; oligopoly; price discrimination;

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References

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  1. Monica Giulietti, 1999. "Price discrimination in grocery trade: evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 319-329.
  2. Kathy J. Hayes & Leola B. Ross, 1998. "Is Airline Price Dispersion the Result of Careful Planning or Competitive Forces?," Review of Industrial Organization, Springer, vol. 13(5), pages 523-541, October.
  3. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
  4. Taylor, Curtis R, 2003. " Supplier Surfing: Competition and Consumer Behavior in Subscription Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 223-46, Summer.
  5. Severin Borenstein, 1985. "Price Discrimination in Free-Entry Markets," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 380-397, Autumn.
  6. Greg Shaffer & Z. John Zhang, 2000. "Pay to Switch or Pay to Stay: Preference-Based Price Discrimination in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 397-424, 06.
  7. Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 811-48, October.
  8. Severin Borenstein & Nancy L. Rose, 1991. "Competition and Price Dispersion in the U.S. Airline Industry," NBER Working Papers 3785, National Bureau of Economic Research, Inc.
  9. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
  10. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-40, May.
  11. Drew Fudenberg & Jean Tirole, 1999. "Customer Poaching and Brand Switching," Harvard Institute of Economic Research Working Papers 1871, Harvard - Institute of Economic Research.
  12. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March.
  13. Tore Nilssen, 1992. "Two Kinds of Consumer Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 579-589, Winter.
  14. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
  15. Graddy, K., 1993. "Testing for Imperfect Competition at the Fulton Fish Market," Papers 137, Princeton, Department of Economics - Financial Research Center.
  16. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
  17. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
  18. Lott, John R, Jr & Roberts, Russell D, 1991. "A Guide to the Pitfalls of Identifying Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 14-23, January.
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Cited by:
  1. Sarah Guillou & Stefano Schiavo, 2007. "Export prices and increasing world competition: evidence from French, German, and Italian pricing behavior," Documents de Travail de l'OFCE 2007-25, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009. "Competition and price discrimination in the market for mailing lists," Quantitative Marketing and Economics, Springer, vol. 7(2), pages 147-179, June.
  3. Takanori Adachi & Noriaki Matsushima, 2011. "The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly," KIER Working Papers 800, Kyoto University, Institute of Economic Research.
  4. Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA.
  5. Asplund, Marcus & Eriksson, Rickard & Strand, Niklas, 2001. "Prices, Margins and Liquidity Constraints: Swedish Newspapers 1990-1996," Working Paper Series in Economics and Finance 470, Stockholm School of Economics.

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