Long-Lived Consumers, Intertemporal Bundling, and Tacit Collusion(2006)
AbstractIn a repeated price game with long but finitely-lived consumers, the use of staggered long-term contracts allows firms to earn positive profits for a wider range of discount factors and market structures than without intertemporal bundling. Because consumers anticipate a price war, intertemporal bundling reduces the gains from business-stealing while leaving the cost of the resulting price war is unchanged. Though less empirically relevant, we also show that in a repeated price game with infinitely-lived, and arbitrarily-small, consumers, firms can use a menu of single-period and infinite-length contracts, to earn strictly positive profits for any discount factor or market structure.
Publication DateJune, 2006
Citation InformationJames D. Dana and Yuk-Fai Fong. "Long-Lived Consumers, Intertemporal Bundling, and Tacit Collusion" (2006)
Available at: http://works.bepress.com/james_dana/2/