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Nonlinear pricing in spatial oligopoly

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  • HAMILTON , J. H.
  • THISSE, J.- F.

Abstract

A model of duopoly competition in nonlinear pricing when firms are imperfectly informed about consumer locations is analyzed. A continuum of consumers purchase a variable amount of a product from one of two firms located at the endpoints of the market. At the Nash equilibrium in quantity-outlay schedules, consumers buy the same quantities as they would from the same firm if it were a monopolist facing the same informational asymmetries, but they receive greater surplus. Hence, no efficiency gains result from competition. If consumers have the option to reveal their locations and have the firms deliver the goods, all consumers choose to reveal their locations in equilibrium. Thus, the inefficiencies from information asymmetries may not arise because firms can deliver the good to consumers. In contrast, with a monopoly seller, consumers have no incentives to reveal their locations.
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Suggested Citation

  • Hamilton , J. H. & Thisse, J.- F., 1997. "Nonlinear pricing in spatial oligopoly," LIDAM Reprints CORE 1266, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1266
    DOI: 10.1007/BF02499142
    Note: In : Economic Design, 2, 379-397, 1997
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    References listed on IDEAS

    as
    1. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-562, Winter.
    2. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    3. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
    4. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    5. Hamilton, Jonathan H. & Thisse, Jacques-Francois, 1992. "Duopoly with spatial and quantity- dependent price discrimination," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 175-185, June.
    6. William J. Furlong & George A. Slotsve, 1983. ""Will That Be Pickup or Delivery?": An Alternative Spatial Pricing Strategy," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 271-274, Spring.
    7. Spulber, Daniel F, 1981. "Spatial Nonlinear Pricing," American Economic Review, American Economic Association, vol. 71(5), pages 923-933, December.
    8. repec:bla:econom:v:55:y:1988:i:220:p:461-77 is not listed on IDEAS
    9. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
    10. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946, October.
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    Cited by:

    1. Valletti, Tommaso M., 2000. "Price discrimination and price dispersion in a duopoly," Research in Economics, Elsevier, vol. 54(4), pages 351-374, December.
    2. Silvia Ferreira Jorge & Cesaltina Pacheco Pires, 2004. "Delivered versus mill nonlinear pricing in free entry markets," Nova SBE Working Paper Series wp459, Universidade Nova de Lisboa, Nova School of Business and Economics.
    3. Valletti, Tommaso M., 2002. "Location choice and price discrimination in a duopoly," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 339-358, May.
    4. Aguirre, Inaki & Paz Espinosa, Maria, 2004. "Product differentiation with consumer arbitrage," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 219-239, February.
    5. Pires, Cesaltina Pacheco & Sarkar, Soumodip, 2000. "Delivered nonlinear pricing by duopolists," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 429-456, July.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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