How the Client Effect Moderates Price Competition

Dwight R. Lee and Richard B. McKenzie

Southern Economic Journal, 1998, vol. 64, issue 3, 741-752

Abstract: Why is unregulated competition supposed to drive price down to ruinous levels in some high fixed‐cost‐low marginal‐cost industries (e.g., railroads) but not in others (e.g., hotels)? We argue that price competition is moderated in high fixed‐cost‐low marginal‐cost industries when the value one consumer realizes from the service is affected by the characterics of other consumers. We develop a simple model of this client effect using the example of the demand for hotels and then generalize the implications of our model to other industries.

Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1002/j.2325-8012.1998.tb00091.x

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:wly:soecon:v:64:y:1998:i:3:p:741-752

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().