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Patterns of Competition with Captive Customers

Mark Armstrong () and John Vickers ()

No 864, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We study mixed-strategy equilibrium pricing in oligopoly settings where con-sumers vary in the set of suppliers they consider for their purchase-some being captive to a particular firm, some consider two particular firms, and so on. In the case of "nested reach" we find equilibria, unlike those in more standard models, in which firms are ranked in terms of the prices they might charge. We character-ize equilibria in the three-firm case, and contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer interaction with firms matter for competitive outcomes.

JEL-codes: C72 D43 D83 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic and nep-ore
Date: 2018-12-05
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