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Nonlinear Pricing In Asymmetric Duopoly

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  • MARCO ALDERIGHI

Abstract

We characterise, for both separate and interdependent markets, the local pure-strategies Nash equilibrium of a spatial duopoly game, where consumers are horizontally and vertically heterogeneous, and firms have different cost structures and ranges of product lines. We show that standard results which emerged in the monopoly context can not be generalised to strategic contexts where firms retain market power and there is sufficient competitive pressure. We prove that in the asymmetric duopoly case, when markets are interdependent, the incentive compatibility constraints are slack, and there is no quality distortion. Copyright 2007 The Author Journal compilation 2007 Blackwell Publishing Ltd/University of Adelaide and Flinders University .

Suggested Citation

  • Marco Alderighi, 2007. "Nonlinear Pricing In Asymmetric Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 46(3), pages 205-223, September.
  • Handle: RePEc:bla:ausecp:v:46:y:2007:i:3:p:205-223
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    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. Bernard SalaniƩ, 2005. "The Economics of Contracts: A Primer, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195259, January.
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    Cited by:

    1. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2011. "Second-degree Price Discrimination and Inter-group Effects in Airline Routes between European Cities," Tinbergen Institute Discussion Papers 11-118/3, Tinbergen Institute.

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