Competitive Behaviour-Based Price: Discrimination among Asymmetric Firms

Elias Carroni

No 1501, Working Papers from University of Namur, Department of Economics

Abstract: This article studies the effects of Behaviour-Based Price Discrimination (BBPD) in a horizontally and vertically differentiated duopoly. In a two-period model, firms are allowed to condition their pricing policies on the past purchase behaviour of consumers. The paper shows two different types of equilibria depending on the strength of vertical differentiation. If the difference in quality is small enough, both firms steal each other’s con- sumers and suffer a situation in which prices and profits are lower and the consumer surplus increases. When quality differentials are instead substantial, asymmetric behaviours arise: the high-quality firm sells its product to few consumers at a high price in the first period and then becomes aggressive in the second one. As a consequence, customers only move from the low-quality to the high-quality firm. If consumers are myopic, the ODS scenario is detrimental for them and beneficial for firms in relation to uniform pricing. If instead consumers are forward-looking, they and the low-quality firm are better off and the high-quality firm is worse off when BBPD is viable.

Keywords: Competitive BBPD; Vertical Differentiation; Switching (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2015-01
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.unamur.be/eco/economie/recherche/wpseries/wp/1501.pdf First version, 2015 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.unamur.be/eco/economie/recherche/wpseries/wp/1501.pdf [301 Moved Permanently]--> https://www.unamur.be/eco/economie/recherche/wpseries/wp/1501.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:nam:wpaper:1501

Access Statistics for this paper

More papers in Working Papers from University of Namur, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by François-Xavier Ledru ().