A hybrid equilibrium in segmented markets: the three-firm case

In this paper, we characterize two hybrid equilibria for the three-firm case in segmented markets in which consumers not only value the product itself but also the environment within which the consumption takes place. In equilibrium, the firm with the larger population of loyal consumers chooses the monopoly price while the remaining two firms play a mixed strategy. In the duopoly case, the unique equilibrium is in mixed strategies and no firm focuses only on its loyal consumers.