Dynamic duopoly with best-price clauses

Monika Schnitzer ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This article investigates best-price clauses as a strategic devise to facilitate collusion in a dynamic duopoly game. Best-price clauses guarantee rebates on the purchase price if a customer finds a better price after his purchase. Two different price clauses are distinguished: "most favored customer" and "meet or release." I examine the collusive potential of both clauses in a finite-horizon duopoly model with homogeneous durable goods. In each period, new consumers enter the market. I show that in this context, meet-or-release clauses have a greater anticompetitive potential than most-favored-customer clauses.

Keywords: Market Structure; Firm Strategy; and Market Performance: Oligopoly and Other Imperfect Markets; Monopolistic Competition; Contestable Markets; Market Structure: Industrial Organization and Corporate Strategy; Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (search for similar items in EconPapers)
Date: 1994
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Citations: View citations in EconPapers (34)

Published in RAND Journal of Economics 1 25(1994): pp. 186-196

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Journal Article: Dynamic Duopoly with Best-Price Clauses (1994)
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