Multibrand price dispersion

We study a market in which several firms potentially each supply a number of “brands” of fundamentally the same product. In fashion, for example, a single firm might retail similar items under different labels and different prices. Consumers differ in which products they consider for their purchase, and firms compete using (multi-dimensional) mixed pricing strategies for their brands. Using relative elasticity conditions, we discuss when firms choose to offer uniform pricing across their brands, and when they use segmented pricing so that one “discount” brand is always priced below another. We solve duopoly models in which equilibria can be derived for all parameters. We discuss the impact of introducing a new brand, of imposing a requirement to set uniform prices across a firm’s brands, and of mergers between single-brand firms.