Paper #581

Título:

Endogenous price leadership

Autores:

Eric van Damme y Sjaak Hurkens

Fecha:

Noviembre 2001

Resumen:

We consider a linear price setting duopoly game with di�erentiated 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.

Palabras clave:

Price leadership, endogenous timing, risk dominance

Códigos JEL:

C72, D43

Área de investigación:

Microeconomía

Publicado en:

Games and Economic Behavior 47, 404-20, 2004

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