RT Generic
T1 List pricing and pure strategy outcomes in a Bertrand-Edgeworth duopoly
A1 García Díaz, Antón
A1 Kujal, Praveen
AB Non-existence of a pure strategy equilibrium in a Bertrand-Edgeworth duopoly model is analyzed. The standard model is modified to include a list pricing stage and a subsequent price discounting stage. Both firms first simultaneously choose a maximum list price and then decide to lower the price, or not, in a subsequent discounting stage. List pricing works as a credible commitment device that induces the pure strategy outcome. It is shown that for a general class of rationing rules there exists a sub-game perfect equilibrium that involves both firms playing pure strategies. This equilibrium payoff dominates any other sub-game perfect equilibrium of the game. Further unlike the dominant firm interpretation of a price leader, we show that the small firm may have incentives to commit to a low price and in this sense assume the role of a leader.
SN 2340-5031
YR 2003
FD 2003-10
LK https://hdl.handle.net/10016/300
UL https://hdl.handle.net/10016/300
LA eng
DS e-Archivo
RD 4 may. 2024