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Strategic Delays of Delivery, Market Separation and Demand Discrimination

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  • Eric Avenel
  • Sebastien Mitraille

Abstract

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, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:04/112
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp112.pdf
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    References listed on IDEAS

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    1. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
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    More about this item

    Keywords

    durable good; switching cost; discrimination; intrabrand competition; European car market;
    All these keywords.

    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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