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DYNAMIC PRICE DISCRIMINATION WITH ASYMMETRIC FIRMS *
Author(s) -
CHEN YONGMIN
Publication year - 2008
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2008.00362.x
Subject(s) - duopoly , harm , price discrimination , competition (biology) , microeconomics , position (finance) , economics , time horizon , limit price , business , industrial organization , monetary economics , price level , cournot competition , ecology , finance , political science , law , biology
This paper considers variants of a dynamic duopoly model where one firm has a stronger market position than its competitor. Consumers' past purchases may reveal their different valuations for the two firms' products. Price discrimination based on purchase histories tends to benefit consumers if it does not cause the weaker firm to exit; otherwise it can harm consumers. The effect of price discrimination also depends on firms' cost differences, market competitiveness, and consumers' time horizon. The stronger firm may price below cost in the presence of consumer switching costs, with the purpose and effect of eliminating competition.