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Discriminating Against Captive Customers

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  • Armstrong, Mark
  • Vickers, John

Abstract

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

  • Armstrong, Mark & Vickers, John, 2018. "Discriminating Against Captive Customers," MPRA Paper 89284, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89284
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    References listed on IDEAS

    as
    1. Yongmin Chen & Marius Schwartz, 2015. "Differential pricing when costs differ: a welfare analysis," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 442-460, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Price discrimination; captive customers; consideration sets;
    All these keywords.

    JEL classification:

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

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