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Multibrand Price Dispersion

Author

Listed:
  • Mark Armstrong
  • John Vickers
Abstract
We study a market in which several firms potentially each supply a number of “brands” of fundamentally the same product. In fashion, for example, a single firm might retail similar items under different labels and different prices. Consumers differ in which products they consider for their purchase, and firms compete using (multi-dimensional) mixed pricing strategies for their brands. Using relative elasticity conditions, we discuss when firms choose to offer uniform pricing across their brands, and when they use segmented pricing so that one “discount” brand is always priced below another. We solve duopoly models in which equilibria can be derived for all parameters. We discuss the impact of introducing a new brand, of imposing a requirement to set uniform prices across a firm’s brands, and of mergers between single-brand firms.

Suggested Citation

  • Mark Armstrong & John Vickers, 2023. "Multibrand Price Dispersion," Economics Series Working Papers 1029, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:1029
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    References listed on IDEAS

    as
    1. Mark Armstrong & John Vickers, 2022. "Patterns of Competitive Interaction," Econometrica, Econometric Society, vol. 90(1), pages 153-191, January.
    2. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    3. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-449, October.
    4. Maxim Sinitsyn, 2016. "Managing Price Promotions Within a Product Line," Marketing Science, INFORMS, vol. 35(2), pages 304-318, March.
    5. Jidong Zhou, 2014. "Multiproduct Search and the Joint Search Effect," American Economic Review, American Economic Association, vol. 104(9), pages 2918-2939, September.
    6. Justin P. Johnson & David P. Myatt, 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," American Economic Review, American Economic Association, vol. 93(3), pages 748-774, June.
    7. Shelegia, Sandro, 2012. "Multiproduct pricing in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 231-242.
    8. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    9. Maxim Sinitsyn, 2012. "Coordination of Price Promotions in Complementary Categories," Management Science, INFORMS, vol. 58(11), pages 2076-2094, November.
    10. Steven Salop, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 393-406.
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    12. Maxim Sinitsyn, 2020. "Evaluating horizontal mergers in the presence of price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 39-60, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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