Consumer Heterogeneity and Pricing in a Duopoly with Switching Costs
AbstractIt is well-known that switching costs may facilitate monopoly pricing in a market with price competition between two suppliers of a homogenous good, provided the switching cost is above some critical level. We show that introducing consumer heterogeneity tends to increase the critical switching cost and thereby reduce the stability of the collusive outcome. A testable implication is that widespread price discrimination should go hand in hand with efforts to create switching costs.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0449.
Date of creation: 01 Aug 2000
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- Gabrielsen, T.S. & Vagstad, S., 2001. "Consumer Heterogeneity and Pricing in a Duopoly with Switching Costs," Norway; Department of Economics, University of Bergen 0801, Department of Economics, University of Bergen.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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