Journal article
Imperfect price discrimination in a vertical differentiation model
International journal of industrial organization, v 23(5), pp 341-354
2005
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
We explore the competitive implications of third-degree price discrimination based on consumer information of varying degrees of “precision” in a vertical differentiation duopoly model. We show that, if the cost of information is below a threshold, only the high quality firm will acquire it and offer targeted promotions, while the low quality firm will commit to a uniform price, for any degree of consumer information precision. Equilibrium profits of the high quality firm are monotonically increasing and that of the low quality firm monotonically decreasing as a function of the consumer information precision. Finally, social and consumer welfare are monotonically increasing with respect to the precision of consumer information.
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Details
- Title
- Imperfect price discrimination in a vertical differentiation model
- Creators
- Qihong Liu - University of Massachusetts AmherstKonstantinos Serfes - Drexel University
- Publication Details
- International journal of industrial organization, v 23(5), pp 341-354
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000230546700003
- Scopus ID
- 2-s2.0-20544465824
- Other Identifier
- 991019169660604721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Economics