Price Discrimination and Price Dispersion in a Duopoly PDF Download
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Author: Tommaso M. Valletti
Publisher:
ISBN:
Category : Duopolies
Languages : en
Pages : 41
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Author: Tommaso M. Valletti
Publisher:
ISBN:
Category : Duopolies
Languages : en
Pages : 41
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Book Description
Author: Zachary Dorobiala
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Price dispersion remains a persistent feature of markets for many consumer goods. Theoretically, tension between competing for informed consumers and exploiting captive consumers yields mixed strategy pricing equilibria. This paper considers the implications on pricing levels and dispersion when there is ambiguity about a firm's share of the captive consumers. Said ambiguity forces firms to make pricing decisions without specific probabilities attached to consumer buying habits. The model reveals that ambiguity aversion forces relatively small firms to price higher on average while it causes relatively large firms to price more competitively on average. An experiment provides empirical support for this result, while also showing that individual ambiguity attitudes do not matter when in a market without ambiguity. Additionally, ambiguity significantly lowers price dispersion in markets with a high fraction of informed consumers, while also increasing competition between firms. This effect is primarily driven by the firm with a larger share of captive consumers.
Author: Godfrey Keller
Publisher:
ISBN:
Category : Duopolies
Languages : en
Pages : 50
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Author: Godfrey Keller
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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Author: Thomas A. Abbott
Publisher:
ISBN:
Category : Manufacturing industries
Languages : en
Pages : 58
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Author: Yeonjei Jung
Publisher:
ISBN: 9781303875281
Category : Electronic dissertations
Languages : en
Pages : 102
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Author: Godfrey Keller
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
We study the evolution of prices in a symmetric duopoly where firms are uncertain about the degree of product differentiation. Customers sometimes perceive the products as close substitutes, sometimes as highly differentiated. Firms learn about their competitive environment from the quantities sold and a background signal. As the information of the market outcomes increases with the price differential, there is scope for active learning. In a setting with linear demand curves, we derive firms' pricing strategies as payoff-symmetric mixed or correlated Markov perfect equilibria of a stochastic differential game where the common posterior belief is the natural state variable. When information has low value, firms charge the same price as would be set by myopic players, and there is no price dispersion. When firms value information more highly, on the other hand, they actively learn by creating price dispersion. This market experimentation is transient, and most likely to be observed when the firms' environment changes sufficiently often, but not too frequently.
Author: Sissel Jensen
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
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Author: Robert N. McCauley
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 18
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Author: Eric Emch
Publisher:
ISBN:
Category : Aftermarkets
Languages : en
Pages : 116
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