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Author Chen, Yuxin ♦ Cui, Tony Haitao
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Branded Variant ♦ Uniform Price ♦ Uniform Pricing ♦ Price Fairness ♦ Price Competition ♦ Consumer Concern ♦ Puzzling Phenomenon ♦ Channel Structure ♦ Firm Choice ♦ Strong Concern ♦ Individual Firm ♦ Long-run Sustainability ♦ Extensive Adoption ♦ Natural Mechanism ♦ Integrated Channel ♦ Uniform Pricing Strategy ♦ Price Discrimination ♦ Fairness Concern ♦ Hence Increase Firm Profit
Abstract The extensive adoption of uniform pricing for branded variants is a puzzling phenomenon considering that firms may improve profitability through price discrimination. In the paper, we incorporate consumers ' concerns of price fairness into a model of price competition and show that uniform price for branded variants may emerge in equilibrium. Interestingly, we find that uniform pricing induced by consumers’ concerns of fairness can actually help mitigate price competition and hence increase firms ’ profits. Furthermore, an individual firm may not have incentive to unilaterally mitigate consumers ’ concerns of price fairness to its own branded variants, which suggests the long-run sustainability of the uniform pricing strategy. As a result, fairness concerns from consumers provide a natural mechanism for firms to commit to uniform pricing which enhances their profits. The paper also studies how uniform pricing may affect firms ’ choices of channel structures. We show that with strong concerns of price fairness from consumers, competing firms are more likely to adopt integrated channels. The reason is that firms
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 2009-01-01