When is competition price‐increasing? The impact of expected competition on prices

Sephorah Mangin

RAND Journal of Economics, 2024, vol. 55, issue 4, 627-657

Abstract: We examine the effect of expected competition on markups in a random utility model where the number of competing firms may differ across consumers. Firms observe consumers' utility shocks and set prices using personalized pricing. We derive a precise condition under which the expected markup across consumers can be represented by a simple expression involving consumers' expected utility and the expected demand. This delivers a general condition under which greater expected competition is price‐increasing. Whether this condition holds depends on the distribution of utility shocks, consumers' outside option, the expected number of competing firms, and the distribution of the number of firms competing for each consumer.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1756-2171.12487

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:randje:v:55:y:2024:i:4:p:627-657

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0741-6261

Access Statistics for this article

RAND Journal of Economics is currently edited by James Hosek

More articles in RAND Journal of Economics from RAND Corporation Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().