Product variety and competitive discounts

Daniel F. Spulber*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

A market with free entry monopolistic competition is studied. Nonlinear pricing is shown to be the Bertrand-Nash equilibrium strategy for firms. Given small per capita fixed costs, the nonlinear pricing equilibrium approaches the perfectly competitive equilibrium with marginal cost pricing. Nonlinear pricing is associated with greater product variety than linear pricing. Increased variety leads to efficient pricing.

Original languageEnglish (US)
Pages (from-to)510-525
Number of pages16
JournalJournal of Economic Theory
Volume48
Issue number2
DOIs
StatePublished - Aug 1989

ASJC Scopus subject areas

  • Economics and Econometrics

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