Competitive nonlinear pricing with product differentiation

Researchers have shown that nonlinear pricing always yields greater profit than uniform pricing. However, most of these studies on nonlinear pricing have been done under monopoly setting. Unlike the previous studies, we examine the effect of nonlinear pricing in a competitive environment. We provide a game-theoretical explanation on the choice of a pricing structure between uniform and two-part pricing for the competing firms. We find that the degree of competition between the two firms (or the degree of differentiation between the two products) plays an important role in deciding the optimal pricing structure due to a strategic interaction of the two firms. Specifically, we find that both firms can choose uniform pricing as an equilibrium in a highly competitive environment. © 2002 Elsevier Science Inc. All rights reserved.
Publisher
Elsevier Inc.
Issue Date
2002
Language
ENG
Citation

INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE, v.11, no.2, pp.155 - 173

ISSN
1059-0560
URI
http://hdl.handle.net/10203/4597
Appears in Collection
KGSM-Journal Papers(저널논문)
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