Price Discrimination and Product Line Rivalry

Victor A. Ginsburgh (), W. Bentley Macleod and Shlomo Weber

Working Papers from Queen's University, Department of Economics

Abstract: We introduce a model of oligopolistic price setting where products are characterized by style and quality. Producers are identified by a unique style, and are able to price discriminate among consumers using quality. We show that, in contrast to Mussa and Rosen's work on the discriminating monopolist, firms do not necessarily extract the most surplus from the consumer of low quality products. The model is used to estimate the pricing strategies of firms in the European automobile market. We find the quality parameter that firms use to discriminate appears to be engine capacity.

Date: 1987
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:702

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