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Discriminatory prices, endogenous locations and the Prisoner Dilemma problem

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  • Stefano Colombo

    ()
    (DISCE, Università Cattolica, Milan)

Abstract

In the Hotelling framework, the equilibrium first-degree discriminatory prices are all lower than the equilibrium uniform price. When firms’ locations are fixed, price discrimination emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before setting the price schedule. This paper assumes endogenous locations and shows that uniform pricing emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before choosing where to locate in the market. Price discrimination still is the unique equilibrium outcome when firms may commit only after the location choice.

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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0079.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0079.

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Length: nn pages 19
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:ctc:serie3:ief0079

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Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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Keywords: Price discrimination; Commitment; Location;

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References

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  1. Andrea Terzi, 2005. "International Financial Instability in a World of Currencies Hierarchy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0064, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
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  9. Angelo Baglioni & Andrea Monticini, 2008. "The Intraday Price of Money: Evidence from the e-MID Interbank Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1533-1540, October.
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  14. Andrea Boitani & Carlo Cambini, 2004. "Le gare per i servizi di trasporto locale in Europa e in Italia: molto rumore per nulla?," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2004(122).
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  16. Luca Colombo & Herbert Dawid & Kordian Kabus, 2007. "When do Thick Venture Capital Markets Foster Innovation? An Evolutionary Analysis," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0074, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
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  22. Massimo Bordignon & Luca Colombo & Umberto Galmarini, 2003. "Fiscal Federalism and Endogenous Lobbies' Formation," CESifo Working Paper Series 1017, CESifo Group Munich.
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Cited by:
  1. Giuseppe Mastromatteo, 2011. "H.P. Minsky And Policies To Countervail Crises," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0102, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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