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- Title
MARKET SEGMENTATION WITH NONLINEAR PRICING.
- Authors
SONDEREGGER, SILVIA
- Abstract
We study the benefits and drawbacks of allowing firms to offer different price-quality menus to captive consumers and to consumers more exposed to competition (market segmentation). We show that the effect of market segmentation depends on the relationship between the range of consumer preferences found in captive and competitive markets. When the range of consumer preferences in captive markets is 'wide,' segmentation is quality and (aggregate) welfare reducing, while the opposite holds when the range of consumer preferences in captive markets is 'narrow.' Segmentation always harms captive consumers, while it always benefits consumers located in competitive markets.
- Subjects
MARKET segmentation; NONLINEAR pricing; PRICE-quality relationship; CONSUMER preferences; INDUSTRIAL organization (Economic theory); ECONOMIC competition
- Publication
Journal of Industrial Economics, 2011, Vol 59, Issue 1, p38
- ISSN
0022-1821
- Publication type
Article
- DOI
10.1111/j.1467-6451.2011.00445.x