This paper studies the e¤ect of captive consumers in a competitive model of nonlinear pricing. We focus on the bene…ts and drawbacks of allowing what we call market segmentation, namely, a situation where the price-quality menu o¤ered to captive consumers can di¤er from that o¤ered to consumers that are exposed to competition. We …nd that the e¤ect of market segmentation depends on the relation...

The recent literature on oligopolistic third-degree price discrimination has been primarily concerned with rival firms' incentives to acquire customer-specific information and the consequences of such information on firm profitability and welfare. This literature has taken mostly a static view of the interaction between competing firms. In contrast, in this paper we investigate the impact of cu...

A finite probability mixture model is combined with a contingent valuation model to analyze the existence of differential market segments in a hypothetical market. The approach has at least two principle benefits. First, the model is capable of identifying market segments within the hypothetical market. Second, the model can be used to estimate WTP/WTA within each segment. The model is illustra...