Duopolistic competition in markets where consumers have switching costs
In a dynamic competition model where firms initially share half of the market and consumers have switching costs, consumers’ sophistication, lifespan and concentration impact the possibility to set collusive prices. I first show that with strategic long-run consumers, collusion is harder to implemen...
- Autores:
- Tipo de recurso:
- Fecha de publicación:
- 2017
- Institución:
- Universidad del Rosario
- Repositorio:
- Repositorio EdocUR - U. Rosario
- Idioma:
- spa
- OAI Identifier:
- oai:repository.urosario.edu.co:10336/13453
- Acceso en línea:
- https://doi.org/10.48713/10336_13453
http://repository.urosario.edu.co/handle/10336/13453
- Palabra clave:
- Costes de cambio
Colision de precios
Consumidores estratégicos
Producción
D43
L13
L12
Switching cost
Price collusion
Strategic consumers
Oligopolios
Mercados
- Rights
- License
- http://purl.org/coar/access_right/c_abf2
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Duopolistic competition in markets where consumers have switching costsCostes de cambioColision de preciosConsumidores estratégicosProducciónD43L13L12Switching costPrice collusionStrategic consumersOligopoliosMercadosIn a dynamic competition model where firms initially share half of the market and consumers have switching costs, consumers’ sophistication, lifespan and concentration impact the possibility to set collusive prices. I first show that with strategic long-run consumers, collusion is harder to implement than when consumers are not strategic: with sophisticated consumers, a deviating firm can cash-in the rents that a buyer obtains after switching. I then study the consequences of relaxing buyers concentration and show that collusion is then easier to maintain than with non-strategic consumers: with strategic consumers a firm must offer a low price at the moment of deviation as consumers can benefit from increased competition, emerging from an asymmetric market structure, without having to pay switching costs. The paper suggests simple policy recommendations: it does not suffice to educate consumers about the competitive effects of their current purchasing decisions, but central purchasing agencies also need to be promoted.2017-05-262017-06-01T21:17:39Zinfo:eu-repo/semantics/workingPaperhttp://purl.org/coar/version/c_970fb48d4fbd8a85http://purl.org/coar/resource_type/c_804250application/pdfhttps://doi.org/10.48713/10336_13453 http://repository.urosario.edu.co/handle/10336/13453Abreu, D., 1986, Extremal equilibria of oligopolistic supergames, Journal of Economic Theory 39, 191-225.Abreu, D., 1988, On the theory of infinitely repeated games with discounting, Econometrica 56, 383-96.Anderson, E., Kumar, N, and Rajiv, S., 2004, A comment on: Revisiting dynamic duopoly with consumer switching costs, Journal of Economic Theory 116, 177-186.Fabra, N. and Garc´ıa, A. 2015, Dynamic price competition with switching costs, Dynamic Games Applications.Friedman, J. W., 1971, Oligopoly and the theory of games, Amsterdam: North Holland.Padilla, A.J., 1995, Revising dynamic duopoly with customer switching costs, Journal of Economic Theory 67, 520-530.Shilony, Y., 1977, Mixed pricing in oligopoly, Journal of Economic Theory 14, 373-388.Somaini, P. and Einav, L., 2013, A model of market power in customer markets. Journal of Industrial Economics. 61, 938-986To, T., 1996, Multi-period competition with switching costs: an overlapping generation formulation, The Journal of Industrial Economics, 44, 81-87.instname:Universidad del Rosarioreponame:Repositorio Institucional EdocURspahttps://ideas.repec.org/p/col/000092/015621.htmlhttp://purl.org/coar/access_right/c_abf2Roig Roig, Guillemoai:repository.urosario.edu.co:10336/134532019-09-19T07:37:01Z |
dc.title.none.fl_str_mv |
Duopolistic competition in markets where consumers have switching costs |
title |
Duopolistic competition in markets where consumers have switching costs |
spellingShingle |
Duopolistic competition in markets where consumers have switching costs Costes de cambio Colision de precios Consumidores estratégicos Producción D43 L13 L12 Switching cost Price collusion Strategic consumers Oligopolios Mercados |
title_short |
Duopolistic competition in markets where consumers have switching costs |
title_full |
Duopolistic competition in markets where consumers have switching costs |
title_fullStr |
Duopolistic competition in markets where consumers have switching costs |
title_full_unstemmed |
Duopolistic competition in markets where consumers have switching costs |
title_sort |
Duopolistic competition in markets where consumers have switching costs |
dc.subject.none.fl_str_mv |
Costes de cambio Colision de precios Consumidores estratégicos Producción D43 L13 L12 Switching cost Price collusion Strategic consumers Oligopolios Mercados |
topic |
Costes de cambio Colision de precios Consumidores estratégicos Producción D43 L13 L12 Switching cost Price collusion Strategic consumers Oligopolios Mercados |
description |
In a dynamic competition model where firms initially share half of the market and consumers have switching costs, consumers’ sophistication, lifespan and concentration impact the possibility to set collusive prices. I first show that with strategic long-run consumers, collusion is harder to implement than when consumers are not strategic: with sophisticated consumers, a deviating firm can cash-in the rents that a buyer obtains after switching. I then study the consequences of relaxing buyers concentration and show that collusion is then easier to maintain than with non-strategic consumers: with strategic consumers a firm must offer a low price at the moment of deviation as consumers can benefit from increased competition, emerging from an asymmetric market structure, without having to pay switching costs. The paper suggests simple policy recommendations: it does not suffice to educate consumers about the competitive effects of their current purchasing decisions, but central purchasing agencies also need to be promoted. |
publishDate |
2017 |
dc.date.none.fl_str_mv |
2017-05-26 2017-06-01T21:17:39Z |
dc.type.none.fl_str_mv |
info:eu-repo/semantics/workingPaper |
dc.type.coarversion.fl_str_mv |
http://purl.org/coar/version/c_970fb48d4fbd8a85 |
dc.type.coar.fl_str_mv |
http://purl.org/coar/resource_type/c_8042 |
dc.identifier.none.fl_str_mv |
https://doi.org/10.48713/10336_13453 http://repository.urosario.edu.co/handle/10336/13453 |
url |
https://doi.org/10.48713/10336_13453 http://repository.urosario.edu.co/handle/10336/13453 |
dc.language.none.fl_str_mv |
spa |
language |
spa |
dc.relation.none.fl_str_mv |
https://ideas.repec.org/p/col/000092/015621.html |
dc.rights.coar.fl_str_mv |
http://purl.org/coar/access_right/c_abf2 |
rights_invalid_str_mv |
http://purl.org/coar/access_right/c_abf2 |
dc.format.none.fl_str_mv |
50 application/pdf |
dc.source.none.fl_str_mv |
Abreu, D., 1986, Extremal equilibria of oligopolistic supergames, Journal of Economic Theory 39, 191-225. Abreu, D., 1988, On the theory of infinitely repeated games with discounting, Econometrica 56, 383-96. Anderson, E., Kumar, N, and Rajiv, S., 2004, A comment on: Revisiting dynamic duopoly with consumer switching costs, Journal of Economic Theory 116, 177-186. Fabra, N. and Garc´ıa, A. 2015, Dynamic price competition with switching costs, Dynamic Games Applications. Friedman, J. W., 1971, Oligopoly and the theory of games, Amsterdam: North Holland. Padilla, A.J., 1995, Revising dynamic duopoly with customer switching costs, Journal of Economic Theory 67, 520-530. Shilony, Y., 1977, Mixed pricing in oligopoly, Journal of Economic Theory 14, 373-388. Somaini, P. and Einav, L., 2013, A model of market power in customer markets. Journal of Industrial Economics. 61, 938-986 To, T., 1996, Multi-period competition with switching costs: an overlapping generation formulation, The Journal of Industrial Economics, 44, 81-87. instname:Universidad del Rosario reponame:Repositorio Institucional EdocUR |
instname_str |
Universidad del Rosario |
institution |
Universidad del Rosario |
reponame_str |
Repositorio Institucional EdocUR |
collection |
Repositorio Institucional EdocUR |
repository.name.fl_str_mv |
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repository.mail.fl_str_mv |
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1803710518650732544 |