Endogenous targeted pricing with vertical structure

Ryo Masuyama

MPRA Paper from University Library of Munich, Germany

Abstract: Targeted pricing is an aggressive strategy that steals demand from rivals. Previous studies have shown that a firm prefers targeted pricing to uniform pricing when another supply chain is vertically integrated and thus its downstream firm purchases an input at a constant price. This study relaxes the assumption that supply chains are vertically integrated. When supply chains are vertically separated, downstream firms face increasing input-supply function. Then, targeted pricing reduces the rival's demand and hence its input price, which intensifies competition. This negative effect is so severe in our Hotelling model that a firm prefers uniform pricing to targeted pricing when another supply chain is vertically separated.

Keywords: targeted pricing; uniform pricing; vertical structure; supply chain management; Hotelling model. (search for similar items in EconPapers)
JEL-codes: D43 L10 L13 (search for similar items in EconPapers)
Date: 2024-08-10
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121680

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