Asymmetric Models of Sales

Myatt, David P.; Ronayne, David

doi:10.1257/mic.20240437

Abstract

We generalize the captive-and-shopper model of sales to allow for asymmetries in production costs and captive audiences in an oligopoly. Both kinds of asymmetry determine the firms that compete (using sales) to serve the shoppers. There are natural situations in which more than two firms use sales by engaging in pairwise battles across different price intervals. We study the choice of production technologies via process innovations. A distinctive asymmetry emerges endogenously: one firm innovates more and becomes the dominant supplier of shoppers. The pattern of innovations connects to firms' captive bases and the shape of technological opportunity.

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蝌蚪网 Journal:
Microeconomics