First degree discrimination in a competitive setting : pricing and quality choice
AbstractThe paper investigates competition in price schedules among vertically differentiated producers. First order price discrimination leading to personalized prices is 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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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05010.
Length: 25 pages
Date of creation: Dec 2004
Date of revision:
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Price discrimination; price schedules; personalized prices; vertical differentiation.;
Other versions of this item:
- David Encaoua & Abraham Hollander, 2004. "First degree discrimination in a competitive setting : pricing and quality choice," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00193447, HAL.
- D4 - Microeconomics - - Market Structure and Pricing
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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