Consumer Heterogeneity and Pricing in a Duopoly with Switching Costs
It is well-known that switching costs may facilitate monopoly pricing in a market with price competition between two suppliers of a homogenous good, provided the switching cost is above some critical level. With heterogeneous consumers monopoly pricing entails second degree price dierentiotation with inecient contracts for low demand types. We show that introducing con- sumer heterogeneity may increase the critical switching cost needed to sustain a pure-strategy equilibrium involving monopoly pricing.
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|Date of creation:||2001|
|Contact details of provider:|| Postal: Department of Economics, University of Bergen Fosswinckels Gate 6. N-5007 Bergen, Norway|
Web page: http://www.uib.no/econ/
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- Joseph Farrell and Carl Shapiro., 1988.
"Dynamic Competition with Switching Costs,"
Economics Working Papers
8865, University of California at Berkeley.
- Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
- Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-562, Winter.
- Beggs, Alan & Klemperer, Paul, 1990.
"Multi-Period Competition with Switching Costs,"
CEPR Discussion Papers
436, C.E.P.R. Discussion Papers.
- Jean-Charles Rochet & Lars A. Stole, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 277-311.
- Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
- Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
- Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
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