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On the strategic choice of spatial price policy

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  • THISSE, J.-F.
  • VIVES, X.

Abstract

The strategic incentives, with respect to the choice of price policy in spatial competition, are analyzed in a duopoly model. Price discrimination emerges as the unique equilibriu m outcome in games with either simultaneous choice of policy and pric e or sequential choice where firms may commit first to uniform mill p ricing before the actual market stage. Nevertheless, profits may be h igher with uniform pricing. The authors' models are applied to analyz e some common business practices that arise in geographical pricing, like the basing point system, and in the pricing of varieties or opti ons from a base product in a product-differentiation context. Copyright 1988 by American Economic Association.
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Suggested Citation

  • Thisse, J.-F. & Vives, X., 1987. "On the strategic choice of spatial price policy," LIDAM Discussion Papers CORE 1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1987008
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