Theory and evidence on pricing by asymmetric oligopolies
Koçaş, Cenk and Kıyak, Tunga (2006) Theory and evidence on pricing by asymmetric oligopolies. International Journal of Industrial Organization, 24 (1). pp. 83-105. ISSN 0167-7187
Official URL: http://dx.doi.org/10.1016/j.ijindorg.2005.02.003
We present an analysis of markets with many asymmetrically positioned retailers that compete for the business of both informed and uninformed customers for a homogenous good, such as software, music, book or a brand-name appliance. We show that two forms of asymmetry, one related to loyal segment sizes of retailers and one related to the positioning of firms, completely explain the observed price dispersion in such markets and the multitude of asymmetrical strategies adopted by retailers. The stochastic dominance of empirical mixed strategy measures is used to test the theory with data on 968 books from 10 online retailers.
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