Who should practice price discrimination using rebates in an asymmetric duopoly?

Name: Who should practice price discrimination using rebates in an asymmetric duopoly?
Author: Doğan, Kutsal, Haruvy, E., Rao, R. C.

İsim	Who should practice price discrimination using rebates in an asymmetric duopoly?
Yazar	Doğan, Kutsal, Haruvy, E., Rao, R. C.
Basım Tarihi:	2010-03
Basım Yeri	- Springer Science+Business Media
Konu	Segmentation, Competition, Game theory, Pricing, Rebates, Printers
Tür	Süreli Yayın
Dil	İngilizce
Dijital	Evet
Yazma	Hayır
Kütüphane:	Özyeğin Üniversitesi
Demirbaş Numarası	1573-711X
Kayıt Numarası	03cb92a5-5bd5-4f4a-b7d7-e3f73d62c36a
Lokasyon	Management Information Systems
Tarih	2010-03
Örnek Metin	Price discrimination is generally thought to improve firm profits by allowing firms to extract more consumer surplus. In competition, however, price discrimination may also be costly to the firm because restrictive incentive compatibility conditions may allow the competing firm to gain market share at the discriminating firm’s expense. Therefore, with asymmetric competition, it may be the case that one firm would let the other firm assume the burden of price discrimination. We investigate optimal segmentation in a market with two asymmetric firms and two heterogeneous consumer segments that differ in the importance of price and product attributes. In particular, we investigate second-degree price discrimination under competition with explicit incentive compatibility constraints thus extending prior work in marketing and economics. Focusing on the managerial implications, we explore whether it would be profitable for either or both firms to pursue a segmentation strategy using rebates as a mechanism. We identify conditions under which one or both firms would want to pursue such segmentation. We find that segmentation lessens competition for the less price-sensitive consumer segment and that this results in higher profits to both firms. A key to understanding this result is that segmentation leads to consumer remixing. We establish the key result that if firms are asymmetric in their attractiveness to consumers, the disadvantaged firm in our model is more likely to pursue a segmentation strategy than its rival in equilibrium. We then ask whether this result prevails in practice. To this end, we explore competitive segmentation empirically and are able to verify that disadvantaged firms indeed pursue segmentation through rebates with greater likelihood.
DOI	10.1007/s11129-009-9078-8
Cilt	8

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Who should practice price discrimination using rebates in an asymmetric duopoly?

Yazar Doğan, Kutsal, Haruvy, E., Rao, R. C.

Basım Tarihi 2010-03

Basım Yeri - Springer Science+Business Media

Konu Segmentation, Competition, Game theory, Pricing, Rebates, Printers

Tür Süreli Yayın

Dil İngilizce

Dijital Evet

Yazma Hayır

Kütüphane Özyeğin Üniversitesi

Demirbaş Numarası 1573-711X

Kayıt Numarası 03cb92a5-5bd5-4f4a-b7d7-e3f73d62c36a

Lokasyon Management Information Systems

Tarih 2010-03

Örnek Metin Price discrimination is generally thought to improve firm profits by allowing firms to extract more consumer surplus. In competition, however, price discrimination may also be costly to the firm because restrictive incentive compatibility conditions may allow the competing firm to gain market share at the discriminating firm’s expense. Therefore, with asymmetric competition, it may be the case that one firm would let the other firm assume the burden of price discrimination. We investigate optimal segmentation in a market with two asymmetric firms and two heterogeneous consumer segments that differ in the importance of price and product attributes. In particular, we investigate second-degree price discrimination under competition with explicit incentive compatibility constraints thus extending prior work in marketing and economics. Focusing on the managerial implications, we explore whether it would be profitable for either or both firms to pursue a segmentation strategy using rebates as a mechanism. We identify conditions under which one or both firms would want to pursue such segmentation. We find that segmentation lessens competition for the less price-sensitive consumer segment and that this results in higher profits to both firms. A key to understanding this result is that segmentation leads to consumer remixing. We establish the key result that if firms are asymmetric in their attractiveness to consumers, the disadvantaged firm in our model is more likely to pursue a segmentation strategy than its rival in equilibrium. We then ask whether this result prevails in practice. To this end, we explore competitive segmentation empirically and are able to verify that disadvantaged firms indeed pursue segmentation through rebates with greater likelihood.

DOI 10.1007/s11129-009-9078-8

Cilt 8