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Yuncheol Jeong and Masayoshi Maruyama
''Strategic choice of price policy under exogenous switching costs''
( 2008, Vol. 12 No.26 )
This paper examines the equilibrium incentive for firms to use behavior-based price discrimination in a duopoly market with exogenous switching costs. We find that if there is a large difference in the existing market shares between two firms, then discriminatory pricing is a unique Nash equilibrium. Otherwise, there are three Nash equilibria: both firms engage in discriminatory pricing, or engage in uniform pricing, or engage in mixed strategies. The respective firms are worse off in the discriminatory equilibrium compared with the others.
Keywords: Behavior-based price discrimination
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General
Manuscript Received : Oct 28 2008 Manuscript Accepted : Oct 28 2008

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