RT Journal Article
T1 List pricing and discounting in a Bertrand-Edgeworth duopoly
A1 García Díaz, Antón
A1 Hernán, Roberto
A1 Kujal, Praveen
AB List, or retail, pricing is a widely used trading institution where firms announce a price that may bediscounted at a later stage. Competition authorities view list pricing and discounting as a procompetitivepractice. We modify the standard Bertrand–Edgeworth duopoly model to include list pricing and asubsequent discounting stage. Both firms first simultaneously choose a maximum list price and then decidewhether to discount, or not, in a subsequent stage.We show that list pricing works as a credible commitmentdevice that induces a pure strategy outcome. This is true for a general class of rationing rules. Further unlikethe dominant firm interpretation of a price leader, the low capacity firm may have incentives to commit to alow price and in this sense assume the role of a leader.
PB Elsevier
SN 0167-7187
YR 2009
FD 2009-11
LK https://hdl.handle.net/10016/14951
UL https://hdl.handle.net/10016/14951
LA eng
NO Hernan and Kujal acknowledge financial support from Grant ECO2008-00977/ECON from the Spanish Ministry of Education. Kujal acknowledges financial supportfrom the Instituto Universitario de Economía, Consolider-Ingenio 2010 and theComunidad de Madrid (grant Excelecon).
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RD 1 may. 2024