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Patterns of Competition with Captive Customers

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  • Mark Armstrong
  • John Vickers

Abstract

We study mixed-strategy equilibrium pricing in oligopoly settings where con-sumers vary in the set of suppliers they consider for their purchase-some being captive to a particular firm, some consider two particular firms, and so on. In the case of "nested reach" we find equilibria, unlike those in more standard models, in which firms are ranked in terms of the prices they might charge. We character-ize equilibria in the three-firm case, and contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer interaction with firms matter for competitive outcomes.

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  • Mark Armstrong & John Vickers, 2018. "Patterns of Competition with Captive Customers," Economics Series Working Papers 864, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:864
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    References listed on IDEAS

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    Cited by:

    1. De Francesco, Massimo A. & Salvadori, Neri, 2023. "Bertrand-Edgeworth game under oligopoly. General results and comparisons with duopoly," MPRA Paper 118237, University Library of Munich, Germany.
    2. Armstrong, Mark & Vickers, John, 2020. "Patterns of Price Competition and the Structure of Consumer Choice," MPRA Paper 98346, University Library of Munich, Germany.
    3. Foucart, Renaud & Friedrichsen, Jana, 2021. "All-pay competition with captive consumers," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 75, pages 1-1.
    4. Mark Armstrong & John Vickers, 2022. "Patterns of Competitive Interaction," Econometrica, Econometric Society, vol. 90(1), pages 153-191, January.
    5. Irina Kirysheva & Vladyslav Nora, 2022. "Inefficient Screening in Online Rental Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 70(3), pages 752-774, September.
    6. Massimo A. De Francesco & Neri Salvadori, 2022. "Bertrand–Edgeworth oligopoly: Characterization of mixed strategy equilibria when some firms are large and the others are small," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 803-824, July.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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