Third-degree price discrimination in price leader duopoly

• Main Authors: Li jia-rong, 李家榮
• Other Authors: 林啟智
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/82558160627328664128

碩士 === 佛光大學 === 經濟學系 === 99 === With liberalization in current markets and competition between all firms, even identical products may have various sales results due to different time, different places, customers’ loyalty toward brands, or even diverse habits of consumers. Besides, not all firms work equally well, among which there might be a couple of leader. This research is going to look into the situation in which exists a leader as well as effective market segmentation, and probe into the leader’s and follower’s policies toward the third-degree price discrimination. This paper first assumes that there are only two firms—one is leader, and the other is a follower--both producing substitute product, and both existing in two oligopoly markets which serve as market segmentation. It analyzes if the two firms would decide to engage in third-degree price discrimination. Providing that under the condition of perfect information, mainly based on third stage-game theory analysis, while both firms target profit maximization, this paper will find, on the basis of Stackelberg model, Nash equilibrium solution through backward induction. Our research result indicates that no matter what valuation model the leader apply, the follower will turn to third-degree price discrimination. Under this condition, the leader will also adopt third-degree price discrimination. The equilibrium outcome is both application of third-degree price discrimination. This paper further discusses that if government intervention is around, that is, no third-degree price discrimination is allowed, both firms’ output will not be altered, but the leader will increase its output in a large-scale market, while cut down on its output in a small-scale one. On the contrary, as far as the follower is concerned, its sales in both markets are related to proxy indicators instead of one single approach. At last, this paper will develops the positive effect on society welfare under the condition that no third-degree price discrimination is allowed.