Working paper 04/112 - Abstract

Strategic Delays of Delivery, Market Separation and Demand Discrimination (PDF, file 246 KB) (PDF, 246kB)

Eric Avenel and Sébastien Mitraille

We show that an adequate choice of delays to deliver a durable good allows a monopolist to soften the intra-brand price competition between his two retailers on two different markets, when consumers suffer a switching cost to buy on the market where they are not located. To prevent each retailer from selling on both markets, the upstream producer increases the delay of delivery on the market where the willingness to pay is the lowest. It therefore separates the markets across time, by orientating consumers to the appropriate downstream retailer. Consumers pay their highest valuation, and a price differential higher than the switching cost persists in equilibrium. We discuss the application of our findings to the European car market.

Summary (PDF, file 82.8 KB) (PDF, 82kB)

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