D<scp>amaged</scp> G<scp>oods</scp>

Deneckere, Raymond; McAfee, R. Preston

doi:10.1111/j.1430-9134.1996.00149.x

Cited by 286 publications

(198 citation statements)

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“…However, second-degree price discrimination can lead to a Pareto improvement (Deneckere andMcAfee 1996, Anderson andSong 2004). A necessary condition for second-degree price discrimination to be Pareto improving is that the firm serves more buyers than it would have otherwise.…”

Section: Welfarementioning

confidence: 99%

When Is Price Discrimination Profitable?

2009

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze a model of a quality-constrained monopolist's product line decision that encompasses a variety of important examples of second-degree price discrimination, including intertemporal price discrimination, coupons, advance purchase discounts, versioning of information goods, and damaged goods. We derive necessary and sufficient conditions for price discrimination to be profitable that generalize existing results in the literature. Specifically, we show that when a continuum of product qualities are feasible, price discrimination is profitable if and only if the ratio of the marginal social value from an increase in quality to the total social value of the good is increasing in consumers' willingness to pay. Unlike third-degree price discrimination, we show that second-degree price discrimination may result in a Pareto improvement. However, in general the welfare effects are ambiguous.2

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Section: Welfarementioning

confidence: 99%

When Is Price Discrimination Profitable?

2009

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“…Mussa and Rosen (1978) and Deneckere and McAfee (1996) consider product-line decisions of a monopolist. Different from these studies, in our model, the incumbent can use ads to degrade the quality of the product.…”

Section: Related Literaturementioning

confidence: 99%

Strategies to Fight Ad-Sponsored Rivals

2010

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We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.

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“…The first condition is the same as in (3). It implies that the low-budget type is more likely to have a higher valuation.…”

Section: Seller-provided Financingmentioning

confidence: 65%

“…The fact that joint bidding is permitted for small firms in Outer Continental Shelf auctions can also be explained from this perspective (see Hendricks and Porter [7]). 3 One exception is Sen [19] who considers seller-provided financing as a means of price discrimination when ex ante identical consumers face income fluctuations.…”

Section: Introductionmentioning

confidence: 99%

“…Despite its practical importance, little attention has been paid to buyers' limited purchasing power or limited liquidity in the literature. 3 The existing literature considers buyers who are able to pay more than their reservation price for the good. In a typical example, a seller faces a buyer with unit demand who is able to pay more than his reservation price.…”

Section: Introductionmentioning

confidence: 99%

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