Strategic Delays of Delivery, Market Separation and Demand Discrimination

Eric Avenel and Sebastien Mitraille

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: We show that an adequate choice of delays to deliver a durable good allows a monopolist to soften the intra-brand price competition between his two retailers on two different markets, when consumers suffer a switching cost to buy on the market where they are not located. To prevent each retailer from selling on both markets, the upstream producer increases the delay of delivery on the market where the willingness to pay is the lowest. It therefore separates the markets across time, by orientating consumers to the appropriate downstream retailer. Consumers pay their highest valuation, and a price differential higher than the switching cost persists in equilibrium. We discuss the application of our findings to the European car market.

Keywords: durable good; switching cost; discrimination; intrabrand competition; European car market (search for similar items in EconPapers)
JEL-codes: L12 L22 L40 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-11
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Working Paper: Strategic delays of delivery, market separation and demand discrimination (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:cmpowp:04/112

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