Flexible or Uniform? Optimal Pricing Strategies of Chains

Anastasia Antsygina, Ekaterina Kazakova and Alexander Tarasov

No 11576, CESifo Working Paper Series from CESifo

Abstract: We develop a model of spatial competition with two heterogeneous in their market access chains, choosing between third-degree price discrimination in their local markets (flexible pricing) and a unified chain-level price (uniform pricing). The markets are interconnected with each other via consumers who commute between them and can make purchases in locations where they do not reside. Our model supports an asymmetric equilibrium, in which the two pricing strategies co-exist: the larger chain uses uniform pricing, while the smaller chain employs flexible pricing. We also find that the chains never choose the pricing strategies that maximize the total consumer surplus.

Keywords: spatial competition; price discrimination; uniform pricing; commuters (search for similar items in EconPapers)
JEL-codes: D21 L11 L20 R32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11576

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