Competition versus Collusion: The Impact of Consumer Inertia
AbstractWe consider a model of dynamic price competition to analyze the impact of consumer inertia on theability of firms to sustain high prices. Three main consequences are identified: (i) maintaininghigh prices does not require punishment strategies when firms are sufficiently myopic, (ii) ifbuyers are sufficiently inert, then high prices can be sustained for all discount factors, and(iii) the ability to maintain high prices may depend non-monotonically on the level of thediscount factor. These results provide a number of valuable insights with regard to competitiveand collusive pricing behavior. For example, our findings suggest that measures aiming at loweringthe degree of consumer inertia may in fact facilitate collusion in network industries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 047.
Date of creation: 2012
Date of revision:
Contact details of provider:
Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm
Other versions of this item:
- Bos Iwan & Peeters Ronald & Pot Erik, 2010. "Competition versus Collusion: The Impact of Consumer Inertia," Research Memoranda 024, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- NEP-ALL-2012-09-30 (All new papers)
- NEP-BEC-2012-09-30 (Business Economics)
- NEP-COM-2012-09-30 (Industrial Competition)
- NEP-IND-2012-09-30 (Industrial Organization)
- NEP-MKT-2012-09-30 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pot Erik & Flesch János & Peeters Ronald & Vermeulen Dries, 2009.
"Dynamic Competition with Consumer Inertia,"
037, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- Chen, Y. & Rosenthal, R.W., 1992.
"Dynamic Duopoly with Slowly Changing Customer Loyalties,"
37, Boston University - Industry Studies Programme.
- Chen, Yongmin & Rosenthal, Robert W., 1996. "Dynamic duopoly with slowly changing customer loyalties," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 269-296, May.
- Yongmin Chen & Robert W. Rosenthal, 1992. "Dynamic Duopoly with Slowly Changing Customer Loyalties," Papers 0037, Boston University - Industry Studies Programme.
- McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
- David Genesove & Wallace P. Mullin, 2001.
"Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case,"
American Economic Review,
American Economic Association, vol. 91(3), pages 379-398, June.
- Genesove, David & Mullin, Wallace P, 2001. "Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case," CEPR Discussion Papers 2739, C.E.P.R. Discussion Papers.
- David Genesove & Wallace P. Mullin, 2001. "Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case," NBER Working Papers 8145, National Bureau of Economic Research, Inc.
- Joseph Farrell and Carl Shapiro., 1988.
"Dynamic Competition with Switching Costs,"
Economics Working Papers
8865, University of California at Berkeley.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
- Radner, Roy, 2003. "Viscous demand," Journal of Economic Theory, Elsevier, vol. 112(2), pages 189-231, October.
- Beggs, Alan & Klemperer, Paul, 1990.
"Multi-Period Competition with Switching Costs,"
CEPR Discussion Papers
436, C.E.P.R. Discussion Papers.
- Padilla A. Jorge, 1995. "Revisiting Dynamic Duopoly with Consumer Switching Costs," Journal of Economic Theory, Elsevier, vol. 67(2), pages 520-530, December.
- Svend Albæk & Peter Møllgaard & Per Baltzer Overgaard, 1997.
"Government-Assisted Oligopoly Coordination? A Concrete Case,"
CIE Discussion Papers
1997-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Albaek, Svend & Mollgaard, Peter & Overgaard, Per B, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 429-43, December.
- Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Bollen).
If references are entirely missing, you can add them using this form.