Paper #289

Títol:

Endogenous price leadership

Autors:

Eric van Damme i Sjaak Hurkens

Data:

Maig 1998

Resum:

We consider a linear price setting duopoly game with differentiated products and determine endogenously which of the players will lead and which will follow. While the follower role is most attractive for each firm, we show that waiting is more risky for the low cost firm so that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the high cost firm will choose to wait. Hence, the low cost firm will emerge as the endogenous price leader.

Paraules clau:

Price leadership, endogenous timing, risk dominance

Codis JEL:

C72, D43

Àrea de Recerca:

Microeconomia

Publicat a:

Games and Economic Behavior, 23, 105-29, 2004

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