Strategic nonlinear pricing (Q1601936)

The authors decided to reexamine nonlinear pricing in duopoly markets (in the context of monopoly, this research area has already been thoroughly explored). First, they study a typical homogeneous-product duopoly market with firms applying nonlinear pricing strategies. The existence of three equilibria in mixed strategies is demonstrated when the cost are fixed. It is also shown that at least one firm has to leave the marked with positive probability. Next, they generalize this result to cover the case of \(n\) firms competing for heterogeneous consumers. In the second part of the paper they focus on a differentiated product market with homogeneous consumers, based primarily on the work of Calum and Spulker, extending thereby Bertrand's price competition model. Finally, they present a model of spatial competition with nonlinear pricing.