ASYMMETRIC PRICE-COMPETITION WITH PRICE INERTIA

In this article, I analyze price competition under price inertia. Afte r setting prices, sellers are unable to change them for a period of pr edetermined length, but may delay price commitments indefinitely. Alth ough most consumers consider the firms' products to be perfect substit utes, an arbitrarily small number of ''captive'' consumers display bra nd loyalty to a particular firm, even when the competing brand is chea per. In this article, I show that a firm with even slightly fewer capt ive customers than its competitor achieves monopoly power over all rem aining consumers.