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Competition in posted prices with stochastic discounts
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Gill, David and Thanassoulis, John (2016) Competition in posted prices with stochastic discounts. The Economic Journal, 126 (594). pp. 1528-1570. doi:10.1111/ecoj.12294
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Official URL: http://dx.doi.org/10.1111/ecoj.12294
Abstract
We study price competition between firms over public list or posted prices when a fraction of consumers can subsequently receive discounts with some probability. Such stochastic discounts are a feature of markets in which some consumers bargain explicitly and of markets in which sellers use the marketing practice of couponing. Even though bargainers receive reductions off the posted prices, the potential to discount dampens competitive pressure in the market, thus raising all prices and increasing profits. Welfare falls because of the stochastic nature of the discounts, which generates some misallocation of products to consumers. Stochastic discounts facilitate collusion by reducing the market share that can be gained from a deviation.
| Item Type: | Journal Article | ||||||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||||||
| Library of Congress Subject Headings (LCSH): | Stock options , Stockholders, Price fixing, Stochastic analysis | ||||||||||||
| Journal or Publication Title: | The Economic Journal | ||||||||||||
| Publisher: | Wiley-Blackwell Publishing Ltd. | ||||||||||||
| ISSN: | 0013-0133 | ||||||||||||
| Official Date: | August 2016 | ||||||||||||
| Dates: |
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| Date of first compliant deposit: | 15 January 2016 | ||||||||||||
| Volume: | 126 | ||||||||||||
| Number: | 594 | ||||||||||||
| Page Range: | pp. 1528-1570 | ||||||||||||
| DOI: | 10.1111/ecoj.12294 | ||||||||||||
| Status: | Peer Reviewed | ||||||||||||
| Publication Status: | Published | ||||||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||||||
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