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Analysis of Economic Incentive for Price Discount Presupposing Churn-in  

Song, Jae-Do (동양공업전문대학 경영학부)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.34, no.2, 2009 , pp. 55-75 More about this Journal
Abstract
Price discounts presupposing churn-in are important tools of competition in many industries such as mobile telecommunication services and newspaper. In this case, consumers can get discount only through changing the provider. For analyzing this kind of competitions, we should consider the incentive of utilizing iterative switching. Hence, in this paper, we consider multi-stage equilibrium and can find that equilibria are different from one stage discount. In particular, when consumers' decisions are for maximizing multi-stage utility, discounts can bring about churn-out as well as churn-in and firms lose the incentive of discounts.
Keywords
Churn-in; Price Discount; Price Discrimination; Horizontal Differentiation;
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