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Competitive customer poaching with asymmetric firms

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  • Carroni, Elias

Abstract

Conditioning the pricing policies on purchase history is proven to generate a cutthroat price competition enhancing consumer surplus. This result typically relies on a framework where competitors are assumed to be symmetric. This paper demonstrates that under significant asymmetries of competing firms, the strong firm trades off current market share for future market share and the weak firm does the opposite. This inter-temporal market sharing agreement generates unidirectional poaching and entails new and distinctive welfare implications. In particular, if consumers are sufficiently myopic, price discrimination softens price competition in relation to uniform pricing, overturning the conclusion of previous studies.

Suggested Citation

  • Carroni, Elias, 2016. "Competitive customer poaching with asymmetric firms," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 173-206.
  • Handle: RePEc:eee:indorg:v:48:y:2016:i:c:p:173-206 DOI: 10.1016/j.ijindorg.2016.06.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric price discrimination; Customer poaching; Price discrimination based on purchase history; Privacy;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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