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Nonlinear pricing in spatial oligopoly

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  • HAMILTON , Jonathan
  • THISSE , Jacques-François

    () (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

A model of duopoly competition in nonlinear pricing when firms are imperfectly informed about consumer locations is analyzed. A continuum of consumers purchase a variable amount of a product from one of two firms located at the endpoints of the market. At the Nash equilibrium in quantity-outlay schedules, consumers buy the same quantities as they would from the same firm if it were a monopolist facing the same informational asymmetries, but they receive greater surplus. Hence, no efficiency gains result from competition. If consumers have the option to reveal their locations and have the firms deliver the goods, all consumers choose to reveal their locations in equilibrium. Thus, the inefficiencies from information asymmetries may not arise because firms can deliver the good to consumers. In contrast, with a monopoly seller, consumers have no incentives to reveal their locations.

Suggested Citation

  • HAMILTON , Jonathan & THISSE , Jacques-François, 1996. "Nonlinear pricing in spatial oligopoly," CORE Discussion Papers 1996066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1996066
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1996.html
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    References listed on IDEAS

    as
    1. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-562, Winter.
    2. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
    3. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    4. Hamilton, Jonathan H. & Thisse, Jacques-Francois, 1992. "Duopoly with spatial and quantity- dependent price discrimination," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 175-185, June.
    5. Spulber, Daniel F, 1981. "Spatial Nonlinear Pricing," American Economic Review, American Economic Association, vol. 71(5), pages 923-933, December.
    6. Coyte, Peter C & Lindsey, C Robin, 1988. "Spatial Monopoly and Spatial Monopolistic Competition with Two-Part Pricing," Economica, London School of Economics and Political Science, vol. 55(220), pages 461-477, November.
    7. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
    8. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946.
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    Cited by:

    1. Jorge, Silvia Ferreira & Pires, Cesaltina Pacheco, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," FEUNL Working Paper Series wp459, Universidade Nova de Lisboa, Faculdade de Economia.

    More about this item

    Keywords

    competing principals -nonlinear pricing - spatial competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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