IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v19y2019i2p7n11.html
   My bibliography  Save this article

An Asymmetric Duopoly Model of Price Framing

Author

Listed:
  • Chioveanu Ioana

    (Department of Economics and Finance, Brunel University London, Kingston Lane, UB8 3PH, UK)

Abstract

This note considers an asymmetric duopoly model of price-frame competition in homogeneous product markets. The firms choose simultaneously prices and price formats, and frame differentiation limits price comparability leading to consumer confusion. Here, one firm is more salient than its rival and attracts a larger share of confused consumers. In duopoly equilibrium, the firms randomize on both prices and frames, make strictly positive profits, and pricing is frame-independent. However, the prominent firm sets a higher average price and charges the monopoly price with positive probability. Higher prominence boosts expected profit for both the industry and the salient firm but may harm the rival’s expected profit.

Suggested Citation

  • Chioveanu Ioana, 2019. "An Asymmetric Duopoly Model of Price Framing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-7, June.
    • Handle: RePEc:bpj:bejtec:v:19:y:2019:i:2:p:7:n:11
    DOI: 10.1515/bejte-2018-0068
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejte-2018-0068
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejte-2018-0068?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yiquan Gu & Tobias Wenzel, 2014. "Strategic Obfuscation and Consumer Protection Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 632-660, December.
    2. Carlin, Bruce I., 2009. "Strategic price complexity in retail financial markets," Journal of Financial Economics, Elsevier, vol. 91(3), pages 278-287, March.
    3. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chioveanu, Ioana, 2020. "A more general model of price complexity," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    2. Chioveanu, Ioana, 2019. "Prominence, complexity, and pricing," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 551-582.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    2. Chioveanu, Ioana, 2019. "Prominence, complexity, and pricing," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 551-582.
    3. Samir Mamadehussene, 2020. "The Interplay Between Obfuscation and Prominence in Price Comparison Platforms," Management Science, INFORMS, vol. 66(10), pages 4843-4862, October.
    4. Johannes Johnen & David Ronayne, 2021. "The only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 595-614, September.
    5. Timothy J. Richards & Gordon J. Klein & Celine Bonnet & Zohra Bouamra-Mechemache, 2020. "Strategic Obfuscation and Retail Pricing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 859-889, December.
    6. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and rational inattention in digitalized markets," SAFE Working Paper Series 306, Leibniz Institute for Financial Research SAFE.
    7. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and Rational Inattention in Digitalized Markets," Working Paper Series 1379, Research Institute of Industrial Economics.
    8. David Ronayne, 2020. "The Only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition," Economics Series Working Papers 874, University of Oxford, Department of Economics.
    9. Wenzel, Tobias, 2024. "Collusion, inattentive consumers and shrouded prices," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 579-591.
    10. Yiquan Gu & Tobias Wenzel, 2014. "Strategic Obfuscation and Consumer Protection Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 632-660, December.
    11. Florian Morath & Johannes Münster, 2018. "Online Shopping and Platform Design with Ex Ante Registration Requirements," Management Science, INFORMS, vol. 64(1), pages 360-380, January.
    12. Rasch, Alexander & Thöne, Miriam & Wenzel, Tobias, 2020. "Drip pricing and its regulation: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 353-370.
    13. Aghamolla, Cyrus & Smith, Kevin, 2023. "Strategic complexity in disclosure," Journal of Accounting and Economics, Elsevier, vol. 76(2).
    14. David P. Myatt, 2019. "A Theory of Stable Price Dispersion," Economics Series Working Papers 873, University of Oxford, Department of Economics.
    15. Rasch, Alexander & Wenzel, Tobias, 2015. "The impact of piracy on prominent and non-prominent software developers," Telecommunications Policy, Elsevier, vol. 39(8), pages 735-744.
    16. Gamp, Tobias & Krähmer, Daniel, 2022. "Competition in Search Markets with Naive Consumers," Rationality and Competition Discussion Paper Series 364, CRC TRR 190 Rationality and Competition.
    17. Gu, Yiquan & Wenzel, Tobias, 2015. "Putting on a tight leash and levelling playing field: An experiment in strategic obfuscation and consumer protection," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 120-128.
    18. Yiquan Gu & Tobias Wenzel, 2012. "Strategic Obfuscation and Consumer Protection Policy in Financial Markets: Theory and Experimental Evidence," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2012-14, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    19. Tobias Gamp & Daniel Krähmer, 2022. "Competition in search markets with naive consumers," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 356-385, June.
    20. Yiquan Gu & Tobias Wenzel, 2017. "Consumer confusion, obfuscation and price regulation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(2), pages 169-190, May.

    More about this item

    Keywords

    price framing; price dispersion; imperfect competition;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:19:y:2019:i:2:p:7:n:11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.