Heterogeneous demand and market segmentation: the Argentine pension funds system

The purpose of this article is to assess and formalize the capacity of retirement and pension fund management companies (AFJPs) to segment the market by the income level of demand during 1995 and 2001. By taking a profit maximization model whose specifications include a nonlinear price and a level of demand that is heterogeneous in terms of income level, and by then corroborating this empirically, we confirm the hypothesis that the market was segmented by the management companies and we identify two groups of firms. The first comprised companies that established a high fixed commission and a low variable one with a view to capturing high-income affiliates, while the second group consisted of firms that used the opposite pricing policy to attract low- and mediumincome affiliates. The effect was to reduce direct competition between the two groups of firms.