Discriminatory prices, endogenous locations and the Prisoner Dilemma problem

Stefano Colombo ()

No ief0079, DISCE - Quaderni dell'Istituto di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: In the Hotelling framework, the equilibrium first-degree discriminatory prices are all lower than the equilibrium uniform price. When firms’ locations are fixed, price discrimination emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before setting the price schedule. This paper assumes endogenous locations and shows that uniform pricing emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before choosing where to locate in the market. Price discrimination still is the unique equilibrium outcome when firms may commit only after the location choice.

Keywords: Price discrimination; Commitment; Location (search for similar items in EconPapers)
JEL-codes: D43 L11 (search for similar items in EconPapers)
Pages: nn pages 19
Date: 2008-04
New Economics Papers: this item is included in nep-com, nep-mic, nep-mkt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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