Download or read book Multiproduct Price Competition with Heterogeneous Consumers and Nonconvex Costs written by Luis H.B. Braido and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 be necessarily 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.

Download or read book Handbook of the Economics of Marketing written by and published by Elsevier. This book was released on 2019-09-19 with total page 634 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of the Economics of Marketing, Volume One: Marketing and Economics mixes empirical work in industrial organization with quantitative marketing tools, presenting tactics that help researchers tackle problems with a balance of intuition and skepticism. It offers critical perspectives on theoretical work within economics, delivering a comprehensive, critical, up-to-date, and accessible review of the field that has always been missing. This literature summary of research at the intersection of economics and marketing is written by, and for, economists, and the book's authors share a belief in analytical and integrated approaches to marketing, emphasizing data-driven, result-oriented, pragmatic strategies. - Helps academic and non-academic economists understand recent, rapid changes in the economics of marketing - Designed for economists already convinced of the benefits of applying economics tools to marketing - Written for those who wish to become quickly acquainted with the integration of marketing and economics

Download or read book Price Competition in Two Sided Markets with Heterogeneous Consumers and Network Effects written by Lapo Filistrucchi and published by . This book was released on 2013 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We model a two-sided market with heterogeneous customers and two heterogeneous network effects. In our model, customers on each market side care differently about both the number and the type of customers on the other side. Examples of two-sided markets are online platforms or daily newspapers. In the latter case, for instance, readership demand depends on the amount and the type of advertisements. Also, advertising demand depends on the number of readers and the distribution of readers across demographic groups. There are feedback loops because advertising demand depends on the numbers of readers, which again depends on the amount of advertising, and so on. Due to the difficulty in dealing with such feedback loops when publishers set prices on both sides of the market, most of the literature has avoided models with Bertrand competition on both sides or has resorted to simplifying assumptions such as linear demands or the presence of only one network effect. We address this issue by first presenting intuitive sufficient conditions for demand on each side to be unique given prices on both sides. We then derive sufficient conditions for the existence and uniqueness of an equilibrium in prices. For merger analysis, or any other policy simulation in the context of competition policy, it is important that equilibria exist and are unique. Otherwise, one cannot predict prices or welfare effects after a merger or a policy change. The conditions are related to the own- and cross-price effects, as well as the strength of the own and cross network effects. We show that most functional forms used in empirical work, such as logit type demand functions, tend to satisfy these conditions for realistic values of the respective parameters. Finally, using data on the Dutch daily newspaper industry, we estimate a flexible model of demand which satisfies the above conditions and evaluate the effects of a hypothetical merger and study the effects of a shrinking market for offline newspapers.

Download or read book A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers written by Sergej G. Kokovin and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Our novel approach to modeling monopolistic competition with heterogeneous consumers involves a space of characteristics of a differentiated good (consumers' ideal points), alike Hotelling (1929). Firms have heterogeneous costs à la Melitz (2003). In addition to price setting, each firm also chooses its optimal location/niche in this space. We formulate conditions for positive sorting: more efficient firms serve larger market segments and face tougher competition in the equilibrium. Our framework entails rich equilibrium patterns displaying non-monotonic markups, high in the most and least populated niches, and the unequal gains from trade across different consumers.

Download or read book Two Part Pricing Consumer Heterogeneity and Cournot Competition written by Sissel Jensen and published by . This book was released on 2009 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze two-part tariffs in an oligopoly, where each firm commits to a quantity and a fixed fee prior to the determination of unit prices. In the case of homogeneous consumers, Harrison and Kline (2001) showed that the equilibrium involves marginal cost pricing and that increased competition affects industry profit and the tariff structure solely by reducing the fixed fee. We show that firms' pricing strategies may change when we allow for demand side heterogeneity. In particular, we find that the price per unit can be either above or below marginal cost, and that the fixed fee increases with increased competition. Finally, some numerical examples show that full market coverage may arise as an equilibrium feature in cases where a monopolist would exclude low-demand types. Hence, fostering competition may contribute to the fulfillment of the Universal Service requirement that is common in industries such as telecommunications, which applies nonlinear pricing on a normal basis.

Download or read book Price Competition in Multi Sided Markets written by Guofu Tan and published by . This book was released on 2019 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies a general model of price competition among platforms offering differentiated services in multi-sided markets. We incorporate a general form of both within-side and cross-side externalities into a discrete choice model of random utility maximization by consumers on each side of the markets. We consider a two-stage game in which the platforms choose prices (or user fees) simultaneously in the first stage, followed by consumers on all sides simultaneously deciding which platform to join (single-homing) in the second stage. We show that in a symmetric setting with full market coverage, there exists a symmetric equilibrium in prices and the equilibrium price on each side follows a simple rule: The price equals the cost, plus a mark-up due to product differentiation, minus a subsidy due to cross-side externalities. The subsidy to each side accounts for the degree of the aggregate marginal externalities of that side imposed on all the other sides. As competition among platforms increases, both the product differentiation effect and the cross-subsidy are shown to decrease. As such, the price on one side can decrease while the price on another side may increase with the number of platforms. We also discuss the incentives for platforms to merge and the extent of excessive free entry of platforms into the markets as compared to the social optimum. We further compare uniform pricing rule with discriminatory pricing across different sides of the markets and find that the average price across sides under the discriminatory pricing is higher than the uniform price when the externalities are small or when the number of platforms is large. The impacts of consumers' outside options on the equilibrium prices are also studied.

Download or read book Price Competition for Exclusive Customers written by James D. Reitzes and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the tension between competition for the customer and competition in the market in a differentiated-product oligopoly. Consumers make purchases through an exclusive supply relationship that is modeled as a discrete-continuous choice problem. We characterize Bertrand-Nash equilibrium when firms set one-part or two-part price schedules. When firms commit to a two-part price schedule in advance of customers' selection of a supplier, equilibrium unit prices equal marginal costs and fixed fees obey an inverse elasticity rule. When firms cannot commit, bargain-then-ripoff pricing arises where unit prices are above marginal cost and fixed fees are possibly below customer-specific fixed costs. Two-part pricing with commitment yields higher profits - even compared to one-part pricing - provided access demand is log-concave in the fixed fee. One-part pricing, however, provides greater consumer and social welfare than two-part pricing without commitment. If usage demand is sufficiently price elastic, one-part pricing also results in greater consumer and social welfare, though less profit, than two-part pricing of either kind. Finally, when consumers differ in their usage demand, unit prices may be below marginal cost. Firms earn smaller margins on high-usage customers, in contrast to the usual monopoly result.

Download or read book Price Competition in Sequential Multi Product Oligopolies written by Awi Federgruen and published by . This book was released on 2014 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a general model in which, at each echelon of the supply process, an arbitrary number of firms compete, offering one or multiple products to some or all of the firms at the next or possibly subsequent echelons or directly to the end consumer. At each echelon, the offered products are differentiated and the firms belonging to this echelon engage in price competition. The model assumes a general set of piece-wise linear consumer demand functions for all products (potentially) brought to the consumer market, where each product's demand volume may depend on the retail prices charged for all products; consumers' preferences over the various product/retailer combinations are general and asymmetric. Similarly the cost rates incurred by the firms at the most upstream echelon are general as well. We initially study a two-echelon sequential oligopoly with competing suppliers, each selling multiple products indirectly through a pool of multiple competing retailers or directly to end consumers. In some cases, a supplier may choose to sell some or all of its products simultaneously via its direct sales channel and indirectly via some or all of the retailers. We characterize the equilibrium behavior under linear price-only contracts. In the second stage, given wholesale prices and prices of direct sales channels selected in the first stage, all retailers simultaneously decide on their retail prices to maximize their total profits among all products of all suppliers they choose to do business with. In the first stage, the suppliers anticipate the retailers' responses and all suppliers simultaneously maximize their total pro ts from all channels direct or indirect channels by selecting the wholesale prices and direct sales channel prices. We show that in this two-stage competition model, a subgame perfect Nash equilibrium always exists. Multiple subgame perfect equilibria may arise but, if so, all equilibria are equivalent in the sense of generating unique demands and profits for all firms. We subsequently generalize our results to supply chain models with an arbitrary set of echelons, and show how all equilibrium performance measures can be computed with an efficient recursive scheme. The model may, also be used to evaluate the impact of various structural changes in the supply chain network.

Download or read book Spatial Multiproduct Duopoly Pricing written by Giovanni Nero and published by . This book was released on 1995 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Imperfect Competition and Heterogeneous Consumers written by Michael L. Katz and published by . This book was released on 1981 with total page 458 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monopolistic Competition Multiproduct Firms and Optimum Product Diversity written by Gianmarco I. P. Ottaviano and published by . This book was released on 1999 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Pricing in Markets with Non Convex Costs written by Navid Azizan and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a market run by an operator, who seeks to satisfy a given consumer demand for a commodity by purchasing the needed amount from a group of competing suppliers with non-convex cost functions. The operator knows the suppliers' cost functions and announces a price/payment function for each supplier, which determines the payment to that supplier for producing different quantities. Each supplier then makes an individual decision about how much to produce, in order to maximize its own profit. The key question is how to design the price functions. To that end, we propose a new pricing scheme, which is applicable to general non-convex costs, and allows using general parametric pricing functions. Optimizing for the quantities and the price parameters simultaneously, and the ability to use general parametric pricing functions allows our scheme to find prices that are typically economically more efficient and less discriminatory than those of the existing schemes. In addition, we supplement the proposed method with a polynomial-time approximation algorithm, which can be used to approximate the optimal quantities and prices. Our framework extends to the case of networked markets, which, to the best of our knowledge, has not been considered in previous work.

Download or read book Non Reservation Price Equilibria and Consumer Search written by Maarten C. W. Janssen and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: When consumers do not know the prices at which different firms sell, they often also do not know production costs. Consumer search models which take asymmetric information about production costs into account continue focusing on reservation price equilibria (RPE) and their properties. We argue that RPE assume specific out-of-equilibrium beliefs that are not consistent with the logic of the D1 refinement criterion. Moreover, RPE suffer from a non-existence problem as they typically do not exist when cost uncertainty is large. We characterize an alternative class of socalled non-RPE. We show these equilibria always exist and do not rely on specific out-of-equilibrium beliefs. Non-reservation equilibria are characterized by active consumer search among consumers. As cost uncertainty facilitates search, more consumers make price comparisons resulting in stronger price competition between firms and higher consumer surplus.

Download or read book Sequential Multi Product Price Competition in Supply Chain Networks written by Awi Federgruen and published by . This book was released on 2015 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a general model in which, at each echelon of the supply process, an arbitrary number of firms compete, offering one or multiple products to some or all of the firms at the next echelon, with firms at the most downstream echelon selling to the end consumer. At each echelon, the offered products are differentiated and the firms belonging to this echelon engage in price competition. The model assumes a general set of piece-wise linear consumer demand functions for all products (potentially) brought to the consumer market, where each product's demand volume may depend on the retail prices charged for all products; consumers' preferences over the various product/retailer combinations are general and asymmetric. Similarly the cost rates incurred by the firms at the most upstream echelon are general as well.We initially study a two-echelon sequential oligopoly with competing suppliers, each selling multiple products through a pool of multiple competing retailers. We characterize the equilibrium behavior under linear price-only contracts. In the second stage, given wholesale prices selected in the first stage, all retailers simultaneously decide on their retail prices to maximize their total profits among all products of all suppliers they choose to do business with. In the first stage, the suppliers anticipate the retailers' responses and all suppliers simultaneously maximize their total profits from all channels by selecting the wholesale prices. We show that in this two-stage competition model, a subgame perfect Nash equilibrium always exists. Multiple subgame perfect equilibria may arise but, if so, all equilibria are equivalent in the sense of generating unique demands and profits for all firms. We subsequently generalize our results to supply chain models with an arbitrary set of echelons, and show how all equilibrium performance measures can be computed with an efficient recursive scheme. Moreover, we establish how changes in the structure of the supply chain network, or changes in the model parameters, in particular, exogenous cost rates, or intercept values in the demand functions, impact on the system-wide equilibrium. These comparative statics results allow for the quantification of cost pass-through effects and the measurement and characterization of the brand value of different retailers and suppliers.

Download or read book Simultaneous Search for Differentiated Products written by José L. Moraga González and published by . This book was released on 2020 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the literature on simultaneous search by allowing for differentiated products and consumer search cost heterogeneity. In a duopolistic market, consumers with sufficiently low search costs choose to inspect the products of the two firms and purchase, if any, the most suitable; consumers with higher search costs choose to examine just one of the products; consumers with prohibitively high search costs do not check any of the products and drop out of the market altogether. For arbitrary search cost distributions, when match values are assumed to be uniformly distributed, a symmetric price equilibrium always exists. We provide a necessary and sufficient condition on the search cost distribution under which an increase in the costs of search of all consumers may result in a lower, equal or higher equilibrium price. The effects of prominence on equilibrium prices are also studied. The prominent firm charges a higher price than the non-prominent firm and both their prices are below the symmetric equilibrium price. Consequently, with simultaneous search, market prominence increases the surplus of consumers. In an extension, we provide conditions under which the equilibrium of the N-firm model exists.

Download or read book Entry Pricing and Product Design in an Initially Monopolized Market written by Steven J. Davis and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze entry, pricing and product design in a model with differentiated products. Under plausible conditions, entry into an initially monopolized market leads to higher prices for some, possibly all, consumers. Entry can induce a misallocation of goods to consumers, segment the market in a way that transfers surplus to producers and undermine aggressive pricing by the incumbent. Post entry, firms have strong incentives to modify product designs so as to raise price by strengthening market segmentation. Firms may also forego socially beneficial product improvements in the post-entry equilibrium, because they intensify price competition too much. Multi-product monopoly can lead to better design incentives than the non-cooperative pricing that prevails under competition

Download or read book Price and Non Price Determination in the Multiproduct Firm 227 66 Classic Reprint written by Glen L. Urban and published by Forgotten Books. This book was released on 2016-11-16 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Price and Non-Price Determination in the Multiproduct Firm, 227-66 See T. E. Pfouts, The Theory of Cost and Production in the Multiproduct Firm, Econometrica XXIX (october pp. 650-658 for a non-linear formulation. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.