Abstract
This study examines a particular form of price discrimination, known as chaotic discrimination, which has the following features: sellers quote a common price but, in reality, they engage in secret and apparently unsystematic price discounts. It is widely held that such forms of price discrimination are seriously inconsistent with profit maximization by sellers.. However, there is no theoretical salience to support this kind of price discrimination. By straining the logic of non-linear dynamics this study explains why such secret discounts are chaotic in the sense that sellers fail to adopt profit-maximising price discounts. A model is developed to argue that such forms of discrimination may derive from the regions of instability of a dynamic model of price discounts.
Highlights
Joseph Bain offers examples of various forms of price the development of chaotic behavior discrimination as arbitrary and non-profit maximizing significantly undermines this dismissal of regions of and labels them as purely unpredictable
We have shown that the dynamic path of price discounts will be characterized by chaotic behavior in the region of instability
The finding has important bearings: it is typically assumed in the deductive equilibrium approach to modern economic theory that the Nash equilibrium dispels all systematic prediction errors and the economic system settles in an equilibrium characterized by selfconfirming and mutual-best responses
Summary
Joseph Bain offers examples of various forms of price the development of chaotic behavior discrimination as arbitrary and non-profit maximizing significantly undermines this dismissal of regions of and labels them as purely unpredictable. The precise aim of the present study is to apply the recent decision As a result such prices are believed to be developments in non-linear and deterministic dynamic arbitrary and non-profit-maximizing [1]. The issue at stake price discrimination may emerge if buyers do not buy is that even though all time paths of a deterministic from the nearest seller Such a form of discrimination is dynamic system are bounded, trajectories that start close labeled as chaotic since the delivered prices are together diverge, or separate, exponentially. A gradually declined [3]
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