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Michèle Breton and Mohammed Kharbach
''Who benefits from price indexation?''
( 2009, Vol. 29 No.4 )
We consider two products traded in two duopoly markets, where competition is assumed a la Hotelling. Firms A and B are operating in Market 1, while Firm B is also competing in Market 2 with Firm C. Prices in Market 2 are pegged linearly to the average price in Market 1. We show that price indexation has anticompetitive consequences that always benefit Firm A, and that benefit Firm B operating in both markets if the size of the reference market is large enough.
Keywords: Hotelling, prices, indexation
Q4 - Energy: General
Manuscript Received : Aug 04 2009 Manuscript Accepted : Oct 29 2009

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