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| Author: | Deneckere, R. J. Kovenock, D. |
| Title: | Price leadership. |
| Journal: | Review of Economic Studies
1992 : JAN, VOL. 59:198, p. 143-162 |
| Index terms: | PRICE THEORY DUOPOLY |
| Language: | eng |
| Abstract: | Duopolistic price-leadership games in which firms have capacity constraints are analyzed. It is shown that when capacities are in the range where the simultaneous-move price setting game yields a mixed-strategy solution the large firm is indifferent between being a leader, a follower, or moving simultaneously. The small firm, while indifferent between being a leader and moving simultaneously, strictly prefers to be a follower. This motivates the discussion of games of timing with ex-post inflexible prices in which the large firm becomes an endogenously determined price-leader. Thus a game-theoretic model of dominant-firm price leadership is provided. |
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