Another model of sales. Price discrimination in a differentiated duopoly market
Abstract: Using a model of horizontal differentiation where a
variety dimension is added to Hotelling's (1929) "linear city" duopoly
model, I show that even when costs and demand are symmetric, price
discrimination may be an equilibrium phenomenon. In the model each customer
have a preferred variety and a preferred firm. They have perfect
information about all prices and may be induced to switch variety and firm
given a sufficient price difference. Price discrimination equilibrium
exists when a sufficient fraction of consumers are elastic both with
respect to variety and firm.
Keywords: Duopoly; price discrimination; (follow links to similar papers)
JEL-Codes: D43; (follow links to similar papers)
18 pages, September 23, 2016
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