David Encaoua () (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - CNRS : UMR8594 - Université Panthéon-Sorbonne - Paris I) Abraham Hollander () (UNIVERSITÉ DE MONTRÉAL - Université de Montréal)
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The paper investigates competition in price schedules among vertically differentiated producers. First order price discrimination leading to personalized prices are the perfect equilibrium of the two-stage game where firms choose at the first stage to commit or not to a uniform price and compete at the second stage. Whether the profits earned by both firms are larger or smaller under discrimination than under uniform pricing depends on the quality gap between firms and on the disparity of consumer preferences. Finally, firms engaged in first degree discrimination choose quality levels that are optimal from a welfare perspective.
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Length: Date of creation: Dec 2004 Date of revision: Handle: RePEc:hal:cesptp:halshs-00193447_v1
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