History-based versus uniform pricing in growing and declining markets

Oz Shy, Rune Stenbacka, David Hao Zhang

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

2 Citeringar (Scopus)

Sammanfattning

We analyze the Markov Perfect Equilibria of an infinite-horizon overlapping generations model with consumer lock-in to compare the performance of history-based and uniform pricing in growing and declining markets. Under history-based pricing, firms charge higher prices to locked-in customers and lower prices to new customers. We show that a high exit rate of consumers (sufficiently declining market) constitutes a sufficient condition for history-based pricing to generate higher average prices than uniform pricing, thereby harming consumer welfare. In contrast, a high consumer entry rate (sufficiently growing market) ensures that history-based pricing intensifies competition compared with uniform pricing.We analyze the Markov Perfect Equilibria of an infinite-horizon overlapping generations model with consumer lock-in to compare the performance of history-based and uniform pricing in growing and declining markets. Under history-based pricing, firms charge higher prices to locked-in customers and lower prices to new customers. We show that a high exit rate of consumers (sufficiently declining market) constitutes a sufficient condition for history-based pricing to generate higher average prices than uniform pricing, thereby harming consumer welfare. In contrast, a high consumer entry rate (sufficiently growing market) ensures that history-based pricing intensifies competition compared with uniform pricing.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftInternational Journal of Industrial Organization
Volym48
UtgåvaSeptember
Sidor (från-till)88-117
Antal sidor30
ISSN0167-7187
DOI
StatusPublicerad - 2016
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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  • 511 Nationalekonomi

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