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 InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1998-49.
Date of creation: 1998
Date of revision:
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Web page: http://center.uvt.nl
price competition; product differentiation; quality;
Other versions of this item:
- Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
- 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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