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Commitment to a strategy of uniform pricing in a two-period duopoly with switching costs

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Abstract

This paper studies decisions by firms of whether to attempt “behavior-based” price discrimination in markets with switching costs by using a two-period duopoly model. When both firms commit themselves to a pricing policy and consumers are “sophisticated” and have rational expectations, there is a dominant strategy equilibrium with both firms engaging in uniform pricing. Both firms are better off in the uniform pricing equilibrium, compared with the discriminatory equilibrium.

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Authors and Affiliations

  1. Faculty of Business and Commerce, Keio University, 2-15-45 Mita, Minatoku, Tokyo, 108-8345, Japan

    Yuncheol Jeong

  2. Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada-ku, Kobe, 657-8501, Japan

    Masayoshi Maruyama

Authors
  1. Yuncheol Jeong
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  2. Masayoshi Maruyama
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Correspondence to Yuncheol Jeong.

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Jeong, Y., Maruyama, M. Commitment to a strategy of uniform pricing in a two-period duopoly with switching costs. J Econ 98, 45–66 (2009). https://doi.org/10.1007/s00712-009-0083-x

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  • DOI: https://doi.org/10.1007/s00712-009-0083-x

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