Article (Journal/Review)
Multiproduct price competition with heterogeneous consumers and nonconvex costs
Fecha
2009-09-20Registro en:
0010-8812 / 1930-7977
10.1016/j.jmateco.2008.06.005
000271070900004
Social, Inct/J-8669-2013
Autor
Braido, Luís Henrique Bertolino
Institución
Resumen
This paper extends the oligopolistic model of price competition to environments with multiple goods, heterogeneous consumers, and arbitrary continuous cost functions. A Nash equilibrium in mixed strategies with an endogenous sharing rule is proven to exist. It is also shown that, in environments with fixed costs and constant marginal costs, all (symmetric and asymmetric) equilibria exhibit price dispersion across stores. Furthermore, the paper identifies scenarios in which prices will necessarily be random. In these markets, stores keep each other guessing because, given the fixed costs, they would incur a loss if their price strategies were anticipated and beaten by competitors. This is interpreted as an important economic feature that is possibly behind random price promotions such as weekly specials. (C) 2008 Published by Elsevier B.V.