Localized and Non-Localized Competition in the Presence of Consumer Lock-in
AbstractThis paper models localized competition between firms when there is consumer lock-in or loyalty. We derive the symmetric equilibrium mixed strategy price distribution under two alternative models, and compare them to symmetric equilibrium strategies under non-localized competition. Contrary to the conventional wisdom in the product differentiation literature, expected prices are lower with localized competition. The analysis questions the robustness of models of product differentiation which ignore consumer lock-in.
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Bibliographic InfoPaper provided by Indian Institute of Management Ahmedabad, Research and Publication Department in its series IIMA Working Papers with number WP1995-12-01_01362.
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- Michael R. Baye & John Morgan, 2005.
"Brand and Price Advertising in Online Markets,"
Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy
2005-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Baye, Michael & Morgan, John, 2004. "Brand and Price Advertising in Online Markets," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt9760k3hz, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Michael Baye & John Morgan, 2005. "Brand and Price Advertising in Online Markets," Microeconomics, EconWPA 0504009, EconWPA.
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