This paper examines the equilibrium incentive for firms to use behavior-based price discrimination in a duopoly market with exogenous switching costs. We find that if there is a large difference in the existing market shares between two firms, then discriminatory pricing is a unique Nash equilibrium. Otherwise, there are three Nash equilibria: both firms engage in discriminatory pricing, or engage in uniform pricing, or engage in mixed strategies. The respective firms are worse off in the discriminatory equilibrium compared with the others.
|Publication status||Published - 2007 Jan 15|
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)