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Article Dans Une Revue The Berkeley Electronic Journal of Theoretical Economics Année : 2007

First-Degree Discrimination by a Duopoly: Pricing and Quality Choice

David Encaoua

Résumé

The paper examines under what conditions vertically differentiated duopolists engage in first-degree price discrimination. Each firm decides on a pricing regime at a first stage and sets prices at a second stage. The paper shows that when unit cost is an increasing and convex function of quality, the discriminatory regime is the unique subgame-perfect equilibrium of such two-stage game. In contrast to the case of horizontal differentiation, the discriminatory equilibrium is not necessarily Pareto-dominated by a bilateral commitment to uniform pricing. Also, the quality choices of perfectly discriminating duopolists are welfare maximizing. The paper explains why a threat of entry may elicit price discrimination by an incumbent monopolist.
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Dates et versions

halshs-00177604 , version 1 (10-10-2007)

Identifiants

  • HAL Id : halshs-00177604 , version 1

Citer

David Encaoua, Abraham Hollander. First-Degree Discrimination by a Duopoly: Pricing and Quality Choice. The Berkeley Electronic Journal of Theoretical Economics, 2007, 7 (1), pp.Article 14. ⟨halshs-00177604⟩
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