Citation

Discussion Paper Details

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Title: Price Competition Between an Expert and a Non-Expert

Author(s): Jan Bouckaert and Hans Degryse

Publication Date: June 1998

Keyword(s): differentiation, Price Competition, Quality and re-entry

Programme Area(s): Industrial Organization

Abstract: This paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert?s repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behaviour of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a ?timid-pricing? equilibrium results. If the non-expert?s repair technology performs well enough, it pays for some consumers to disregard the non-expert. They directly go to the expert?s shop, and an ?aggressive-pricing? equilibrium results. For intermediate values of the non-expert?s successful repair a ?mixed-pricing? equilibrium emerges where the expert randomizes over the monopoly price and some lower price.

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Bibliographic Reference

Bouckaert, J and Degryse, H. 1998. 'Price Competition Between an Expert and a Non-Expert'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1905