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Michèle Breton and Mohammed Kharbach |
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''Who benefits from price indexation?'' |
( 2009, Vol. 29 No.4 ) |
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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. |
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Keywords: Hotelling, prices, indexation |
JEL: Q4 - Energy: General |
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Manuscript Received : Aug 04 2009 | | Manuscript Accepted : Oct 29 2009 |
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