Two-dimensional price discrimination with uncertainty about willingness-to-pay

Sei Beom Won

The Annals of Regional Science, 2017, vol. 58, issue 3, No 6, 513-541

Abstract: Abstract This paper discusses price discrimination in a duopoly in two-dimensional consumer characteristics space. We assume that there is uncertainty about a single unobservable characteristic, willingness-to-pay. We show that the subgame perfect equilibrium supports that both firms choose separate pricing policies, uniform pricing and discriminatory pricing, and the Prisoner’s Dilemma does not occur. This result is maintained when the uncertainty is sufficiently high, and differs from Thisse and Vives’s one-dimensional model in which discriminatory pricing is a dominant strategy. As the uncertainty decreases, the pricing structure converges to Thisse and Vives’s model in which the Prisoner’s Dilemma and all-out competition emerge.

JEL-codes: D43 L11 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s00168-017-0806-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:anresc:v:58:y:2017:i:3:d:10.1007_s00168-017-0806-9

Ordering information: This journal article can be ordered from
http://link.springer.com/journal/168

DOI: 10.1007/s00168-017-0806-9

Access Statistics for this article

The Annals of Regional Science is currently edited by Martin Andersson, E. Kim and Janet E. Kohlhase

More articles in The Annals of Regional Science from Springer, Western Regional Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().