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Product Variety and Competitive Discounts, Journal of Economic Theory

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.

Type

Article

Author(s)

Daniel Spulber

Date Published

1989

Citations

Spulber, Daniel. 1989. Product Variety and Competitive Discounts. Journal of Economic Theory. 48(2): 510-525.

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