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Dynamic Price Discrimination With Asymmetric Firms

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  • YONGMIN CHEN

Abstract

This paper considers variants of a dynamic duopoly model where one firm has a stronger market position than its competitor. Consumers' past purchases may reveal their different valuations for the two firms' products. Price discrimination based on purchase histories tends to benefit consumers if it does not cause the weaker firm to exit; otherwise it can harm consumers. The effect of price discrimination also depends on firms' cost differences, market competitiveness, and consumers' time horizon. The stronger firm may price below cost in the presence of consumer switching costs, with the purpose and effect of eliminating competition.

Suggested Citation

  • Yongmin Chen, 2008. "Dynamic Price Discrimination With Asymmetric Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 729-751, December.
    • Handle: RePEc:bla:jindec:v:56:y:2008:i:4:p:729-751
    DOI: 10.1111/j.1467-6451.2008.00362.x
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    References listed on IDEAS

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