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Price dispersion in duopolies with heterogeneous consumers

  • Sinitsyn, Maxim

In this paper, I modify Varian's [Varian, H.R. (1980). A model of sales, American Economic Review, 70(4), 651-659] model of sales to allow for heterogeneity in consumer preferences. I show that in mixed strategy equilibria each firm charges a finite number of prices. Using this characterization, I examine the effect of consumer heterogeneity on firms' optimal pricing strategies.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 197-205

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Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:197-205
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  10. Canoy, Marcel, 1996. "Product Differentiation in a Bertrand-Edgeworth Duopoly," Journal of Economic Theory, Elsevier, vol. 70(1), pages 158-179, July.
  11. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
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  13. Kocas, Cenk & Kiyak, Tunga, 2006. "Theory and evidence on pricing by asymmetric oligopolies," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 83-105, January.
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  18. Gal-or, Esther, 1982. "Hotelling's spatial competition as a model of sales," Economics Letters, Elsevier, vol. 9(1), pages 1-6.
  19. Allen, Beth & Hellwig, Martin, 1993. "Bertrand-Edgeworth Duopoly with Proportional Residual Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 39-60, February.
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  23. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
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  25. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
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