Price Competition with a Distribution of Switch Costs and Reservation Prices

By: Jerry R. Green and Suzanne Scotchmer

Format:Print
| Language:English

Abstract

When there is a distribution of switch costs and of reservation prices for a good, and marginal cost of producing the good is zero, equilibrium in pure price strategies may (and sometimes must) exhibit price dispersion. Equilibrium may or may not exist, and there may be a continuum of equilibria. When there are no fixed costs, equilibrium with entry will not exist when there are any switch costs low relative to the reservation prices.

Citation

Green, Jerry R., and Suzanne Scotchmer. "Price Competition with a Distribution of Switch Costs and Reservation Prices." Harvard Institute of Economic Research Discussion Paper, No. 1260, September 1986.