| Summary: | This thesis aims at a theoretical study of price discrimination in imperfectly competitive
markets and will address such issues as the viability of price discrimination when markets
are oligopolistic rather than monopolistic. More specifically, it seeks to determine what
effects the introduction of competition to a monopoly market will have on a firm's ability
to price discriminate. Also examined is price discrimination in the presence of collusion
among consumers, as well as the connection between a monopolist's linear pricing and
resale among consumers.
The first paper is a version of an article published in the Canadian Journal of Economics
and examines a simple two stage game in which firms compete in prices by a chosen pricing
instrument. The instruments considered include a simple uniform pricing technology and a
promotional pricing technology in the form of an advertised discount coupon. Consumers
are separated by types, informed and uninformed. Therefore, a motive for price competition
exists for the purpose of separating between the two types of consumers. It is shown that
the sustainability of an asymmetric choice of pricing instrument between the two firms will
prevail in a duopoly market in equilibrium. Consequently, the coexistence of two different
pricing schemes is viable even when firms are symmetric in all other respects. In light of this
finding, justification may be established for the observed differences in pricing strategies
in markets today.
The second paper considers a model of homogeneous good Bertrand competition with
asymmetric information. Consumers differ in a unidimensional type space and are grouped
exogenously as either loyal or bargain-hunting. It is found that in such an asymmetric information
environment, the equilibrium is unique and exists in mixed strategies. Furthermore,
firms will compete via nonlinear price schedules similar to that of a monopolist to the extent
that a "flattening out" effect takes place. More importantly, competition occurs in the
reservation utility of the marginal consumer by use of pseudo-incentive compatible direct
mechanisms.
Lastly, the third paper examines the standard nonlinear pricing model where we introduce
a set of consumers who may act cooperatively in a pairwise manner (colluders).
We model collusion by introducing a third party whose objective is to maximize the sum
of utilities for any colluding pair. We assume that this third party is perfectly informed
regarding the private information of the consumers. We find that in this framework, a
multidimensional screening problem, due to the two dimensional private information held
by a colluding pair, arises. We introduce a reduction method by which the representation
of this multidimensionality may be suppressed. A sufficient condition for its existence is
then characterized. This allows us to provide an equivalent representation which coincides
with the standard nonlinear pricing model. Generalizations about asymmetric coalition
sizes are then made possible. === Arts, Faculty of === Vancouver School of Economics === Graduate
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