| Tommy Staahl Gabrielsen, University of Bergen Steinar Vagstad, University of Bergen |
| Consumer Heterogeneity and Pricing in a Duopoly with Switching Costs |
| Session: C-12-13 Wednesday 16 August 2000 by Vagstad, Steinar |
| It is well-known that switching costs may facilitate monopoly pricing in a market with price competition between two suppliers of a homogenous good, provided the switching cost is above some critical level. We show that introducing consumer heterogeneity tends to increase the critical switching cost and thereby reduce the stability of the collusive outcome. A testable implication is that widespread price discrimination should go hand in hand with efforts to create switching costs. |
| Submitted paper full-text in .pdf |