On how size and composition of customer bases affect equilibrium in a duopoly with switching costs

Tommy Gabrielsen and Steinar Vagstad

Review of Economic Design, 2004, vol. 9, issue 1, 59-71

Abstract: Switching costs may facilitate monopoly pricing in a market with price competition between two suppliers of a homogenous good, provided the switching cost is above some critical level. It is also well known that asymmetric size of customer bases makes monopoly pricing more difficult. Adding consumer heterogeneity to the model we demonstrate that also composition of each firm’s customer base affects pricing, and this composition may aggravate or ease the incentives to break out of the monopoly pricing equilibrium. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Switching costs; consumer heterogenity; duopoly; price discrimination (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s10058-004-0120-8

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