Commitment to a strategy of uniform pricing in a two-period duopoly with switching costs |
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Authors: | Yuncheol Jeong Masayoshi Maruyama |
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Institution: | (1) Faculty of Business and Commerce, Keio University, 2-15-45 Mita, Minatoku, Tokyo 108-8345, Japan;(2) Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan |
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Abstract: | This paper studies decisions by firms of whether to attempt “behavior-based” price discrimination in markets with switching
costs by using a two-period duopoly model. When both firms commit themselves to a pricing policy and consumers are “sophisticated”
and have rational expectations, there is a dominant strategy equilibrium with both firms engaging in uniform pricing. Both
firms are better off in the uniform pricing equilibrium, compared with the discriminatory equilibrium.
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Keywords: | Behavior-based price discrimination Switching cost Customer poaching |
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