Dynamic Duopoly with Best-Price Clauses

Monika Schnitzer ()

RAND Journal of Economics, 1994, vol. 25, issue 1, 186-196

Abstract: This article investigates best-price clauses as a strategic devise to facilitate collusion in a dynamic duopoly game. Best-price clauses guarantee rebates on the purchase price if a customer finds a better price after his purchase. Two different price clauses are distinguished: "most favored customer" and "meet or release." I examine the collusive potential of both clauses in a finite-horizon duopoly model with homogeneous durable goods. In each period, new consumers enter the market. I show that in this context, meet-or-release clauses have a greater anticompetitive potential than most-favored-customer clauses.

Date: 1994
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