Conditional loyalty and its implications for pricing

Abstract Bertrand–Edgeworth competition has recently been analyzed under imperfect buyer mobility, as a game in which, once prices are chosen, static subgame (BS) is played where the buyers choose which seller to visit (see, e.g., Burdett et al. J Political Econ 109:1060–1085, 2001). Our paper considers symmetric duopoly two play two-stage BS of information after price setting. An “assessment equilibrium” shown exist with at firms sufficiently close each other, keep loyal if previously served. Conditional loyalty proved increase duopolists’ market power: corresponding perfect equilibrium entire game, uniform higher than that persistently randomizing.