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Strategic Delays of Delivery, Market Separation and Demand Discrimination


  • Eric Avenel
  • Sebastien Mitraille



We show that an adequate choice of delays to deliver a durable good allows a monopolist to soften the intra-brand price competition between his two retailers on two different markets, when consumers suffer a switching cost to buy on the market where they are not located. To prevent each retailer from selling on both markets, the upstream producer increases the delay of delivery on the market where the willingness to pay is the lowest. It therefore separates the markets across time, by orientating consumers to the appropriate downstream retailer. Consumers pay their highest valuation, and a price differential higher than the switching cost persists in equilibrium. We discuss the application of our findings to the European car market.

Suggested Citation

  • Eric Avenel & Sebastien Mitraille, 2004. "Strategic Delays of Delivery, Market Separation and Demand Discrimination," The Centre for Market and Public Organisation 04/112, Department of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:cmpowp:04/112

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    References listed on IDEAS

    1. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    2. Anderson, Simon P. & Ginsburgh, Victor A., 1994. "Price discrimination via second-hand markets," European Economic Review, Elsevier, vol. 38(1), pages 23-44, January.
    3. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-1478, December.
    4. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    5. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    6. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
    7. Kuhn, Kai-Uwe, 1998. "Intertemporal Price Discrimination in Frictionless Durable Goods Monopolies," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 101-114, March.
    8. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
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    More about this item


    durable good; switching cost; discrimination; intrabrand competition; European car market;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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