Price discrimination via the choice of distribution channels

Uwe Dulleck and Rudolf Kerschbamer

No 2005-08, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: This article studies the use of different distribution channels as an instrument of price discrimination in credence goods markets. In credence goods markets, where consumers do not know which quality of the good or service they need, price discrimination proceeds along the dimension of quality of advice offered. High quality advice and appropriate treatment is provided to the most profitable market segment only. Less profitable consumers are induced to demand a treatment without a serious diagnosis. If consumers differ in the probabilities of needing different treatments some consumers are potentially overtreated. By contrast, under heterogeneity in the valuations of a successful intervention some consumers are potentially undertreated. Our results help to explain the casual observation that in the early phase of the IT industry only low quality equipment was distributed via warehouse sellers while today it is quite common to see high quality equipment at discounters.

Keywords: Price Discrimination; Distribution Channels; Credence Goods; Experts; Discounters (search for similar items in EconPapers)
JEL-codes: D40 D82 L15 (search for similar items in EconPapers)
Date: 2005-07
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.jku.at/papers/2005/wp0508.pdf (application/pdf)

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:jku:econwp:2005_08

Access Statistics for this paper

More papers in Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria Contact information at EDIRC.
Bibliographic data for series maintained by René Böheim ().