Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203625
Authors: 
Paha, Johannes
Year of Publication: 
2019
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Industrial Organisation IV No. E26-V1
Abstract: 
The firms in this model set non-binding list prices before competing for buyers by non-cooperatively granting discounts. Each firm has an incentive to set a high list price if, for example, the customers anchor their willingness-to-pay on the list price. However, list price competition occurs if customers are loss-averse with respect to firms charging above-average list prices. The firms may thus find agreements on higher list prices profitable, even if they continue granting discounts non-cooperatively. Most importantly, for being an equilibrium of the game, such agreements do not require a dynamic game or mutual monitoring of the list prices.
Subjects: 
Anchoring
behavioral industrial organization
collusion
list price
loss aversion
reference price
JEL: 
D90
D91
K21
L41
M30
Document Type: 
Conference Paper

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