Another model of sales. Price discrimination in a differentiated duopoly market

Halvor Mehlum

No 12/2016, Memorandum from Oslo University, Department of Economics

Abstract: Using a model of horizontal differentiation where a variety dimension is added to Hotelling's (1929) "linear city" duopoly model, I show that even when costs and demand are symmetric, price discrimination may be an equilibrium phenomenon. In the model each customer have a preferred variety and a preferred firm. They have perfect information about all prices and may be induced to switch variety and firm given a sufficient price difference. Price discrimination equilibrium exists when a sufficient fraction of consumers are elastic both with respect to variety and firm.

Keywords: Duopoly; price discrimination (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2016-09-23
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
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