Price competition in segmented industries
AbstractRepeated interaction between duopolists in a segmented industry is considered. The industry is fragmented into two separate segments. The duopolists compete in prices and segment choice, assuming that pricing strategies are completely flexible while segment choice is irreversible. Initially the two firms are located in different segments of the market, but they can choose to extend their operation to the other segment, operating in the whole industry. It is shown that there exists an equilibrium involving segment location and collusion in prices. The equilibrium path is further restricted by the magnitude of the fixed cost of entering the other segment, and by refinements on the equilibrium concept. Finally, the implications of the irreversibility of the entry decision are analyzed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 34.
Date of creation: Apr 1993
Date of revision:
Contact details of provider:
Web page: http://www.econ.upf.edu/
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Spence, A Michael, 1977. "Nonprice Competition," American Economic Review, American Economic Association, vol. 67(1), pages 255-59, February.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- Carl Davidson & Raymond Deneckere, 1984.
"Excess Capacity and Collusion,"
675, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
- Basu, Kaushik & Bell, Clive, 1991. "Fragmented duopoly : Theory and applications to backward agriculture," Journal of Development Economics, Elsevier, vol. 36(2), pages 145-165, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.