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Patterns of Competition with Captive Customers

Mark Armstrong and John Vickers

MPRA Paper from University Library of Munich, Germany

Abstract: We study mixed-strategy equilibrium pricing in oligopoly settings where consumers vary in the set of suppliers they consider for their purchase---some being captive to a particular firm, some consider two particular firms, and so on. In the case of "nested reach" we find equilibria, unlike those in more standard models, in which firms are ranked in terms of the prices they might charge. We characterize equilibria in the three-firm case, and contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer interaction with firms matter for competitive outcomes.

Keywords: Oligopoly; Bertrand competition; Bertrand-Edgeworth competition; Consideration sets; Mixed strategies (search for similar items in EconPapers)
JEL-codes: C72 D43 D83 L1 L15 (search for similar items in EconPapers)
Date: 2018-12-03
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Patterns of Competition with Captive Customers (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90362

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