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Discriminating Against Captive Customers

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  • Mark Armstrong
  • John Vickers

Abstract

Mark Armstrong, John Vickers We analyze a market where some consumers only consider buying from a specific seller while other consumers choose the best deal from several sellers. When sellers are able to discriminate against their captive customers, we show that discrimination harms consumers in aggregate relative to the situation with uniform pricing when sellers are approximately symmetric, while the practice tends to benefit consumers in sufficiently asymmetric markets.

Suggested Citation

  • Mark Armstrong & John Vickers, 2018. "Discriminating Against Captive Customers," Economics Series Working Papers 858, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:858
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    References listed on IDEAS

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    1. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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