Strategic choice of price policy under exogenous switching costs

Yuncheol Jeong () and Masayoshi Maruyama ()
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Yuncheol Jeong: Faculty of Business and Commerce, Keio University
Masayoshi Maruyama: Graduate School of Business Administration, Kobe University

Economics Bulletin, 2008, vol. 12, issue 26, 1-8

Abstract: This paper examines the equilibrium incentive for firms to use behavior-based price discrimination in a duopoly market with exogenous switching costs. We find that if there is a large difference in the existing market shares between two firms, then discriminatory pricing is a unique Nash equilibrium. Otherwise, there are three Nash equilibria: both firms engage in discriminatory pricing, or engage in uniform pricing, or engage in mixed strategies. The respective firms are worse off in the discriminatory equilibrium compared with the others.

Keywords: Behavior-based; price; discrimination (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2008-10-28
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