Competition, Incomplete Discrimination and Versioning
Producers of software viewers commonly offer basic versions of their products for freewhile more sophisticated versions are highly priced, thereby providing less attractive orlower valuations consumers with larger utility levels. We give some foundations to thisoutcome called versioning. We consider a duopoly in which firms offer differentiated goodsto a representative consumer; the buyer has distinct marginal valuations for the quality ofthe products; each producer perfectly knows the consumer’s taste for its own product, butremains uninformed about its taste for the rival’s product.When each product cannot be purchased in isolation of the other one, a phenomenon ofendogenous preferences arises since a firm’s offer to the consumer depends on the informationunknown by the rival firm. Multiple equilibria emerge and the consumer’s rent increases withhis valuation for one product and decreases with the valuation for the other product. Bycontrast, when each product can be purchased in isolation of the other one, at the uniqueequilibrium consumers with larger valuations for a product earn higher rents.The analysis is undertaken under two alternative pricing policies: in the partially-discriminatorycase, producers make use of the known information only; in the fully-discriminatorycase, each producer second-degree price discriminates the consumer according to the unknowninformation. We show that, sometimes, firms prefer partial to full discrimination,i.e., strategic ignorance of consumers’ tastes for the rival brand softens competition.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01 41 17 60 81
Web page: http://www.crest.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thisse, J.-F. & Vives, X., 1987.
"On the strategic choice of spatial price policy,"
CORE Discussion Papers
1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- David Martimort & Lars Stole, 2001.
"Contractual Externalities and Common Agency Equilibria,"
CESifo Working Paper Series
581, CESifo Group Munich.
- Martimort David & Stole Lars, 2003. "Contractual Externalities and Common Agency Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-40, July.
- Martimort, David & Stole, Lars, 1999. "Contractual Externalities and Common Agency Equilibria," IDEI Working Papers 110, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
- Ivaldi, Marc & Martimort, David, 1993.
"Competition under Nonlinear Pricing,"
IDEI Working Papers
29, Institut d'Économie Industrielle (IDEI), Toulouse.
- Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March.
- Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
- Alessandro Pavan, 2004.
"On the Optimality of Privacy in Sequential Contracting,"
Theory workshop papers
658612000000000067, UCLA Department of Economics.
- Calzolari, Giacomo & Pavan, Alessandro, 2006. "On the optimality of privacy in sequential contracting," Journal of Economic Theory, Elsevier, vol. 130(1), pages 168-204, September.
- Giacomo Calzolari & Alessandro Pavan, 2005. "On the Optimality of Privacy in Sequential Contracting," Discussion Papers 1404, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Giacomo Calzolari & Alessandro Pavan, 2004. "On the Optimality of Privacy in Sequential Contracting," Discussion Papers 1394, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Laffont, Jean-Jacques & Pouyet, Jérôme, 2000.
"The Subsidiarity Bias in Regulation,"
IDEI Working Papers
96, Institut d'Économie Industrielle (IDEI), Toulouse.
- Eric W. Bond & Thomas A. Gresik, 1997.
"Competition between asymmetrically informed principals,"
Springer, vol. 10(2), pages 227-240.
- Bond, E.W. & Gresik & T.A., 1995. "Competition Between Asymmetrically Informed Principals," Papers 11-95-13, Pennsylvania State - Department of Economics.
- Liu, Qihong & Serfes, Konstantinos, 2006. "Customer information sharing among rival firms," European Economic Review, Elsevier, vol. 50(6), pages 1571-1600, August.
- David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common-agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102.
- Olsen, T.E. & Osmundsen, P., 1998.
"Strategic Tax Competition; Implications of National Ownership,"
11/98, Norwegian School of Economics and Business Administration-.
- Olsen, Trond E. & Osmundsen, Petter, 2001. "Strategic tax competition; implications of national ownership," Journal of Public Economics, Elsevier, vol. 81(2), pages 253-277, August.
- Trond Olsen & Petter Osmundsen, 2000. "Strategic Tax Competition; Implications of National Ownership," CESifo Working Paper Series 281, CESifo Group Munich.
- Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
- Bond, E.W. & Gresik, T.A., 1998. "Incentive Compatible Information Transfer Between Asymmetrically Informed Principals," Papers 8-98-1, Pennsylvania State - Department of Economics.
- Miravete, Eugenio J & Röller, Lars-Hendrik, 2003. "Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early US Cellular Telephone Industry," CEPR Discussion Papers 4069, C.E.P.R. Discussion Papers.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
- Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, June.
When requesting a correction, please mention this item's handle: RePEc:crs:wpaper:2004-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Florian Sallaberry)
If references are entirely missing, you can add them using this form.