SALES TECHNOLOGY AND PRICE LEADERSHIP
Two firms sell a homogeneous product to two buyers who differ significantly in their valuation of the good and are allowed to charge (possibly) multiple two-part tariffs. Firms decide upon optimal prices and the choice of sales technologies which help acquire revenues from nonlinear prices. There is a subgame-perfect equilibrium where firms choose different sales technologies and the firm with an advanced sales technology emerges to be a price leader, charging a two-part tariff and selling only to the low-valuation buyers. Consequently, the firm with the less advanced sales technology follows, charges only a fixed fee and serves the high-valuation buyers and always earns strictly higher profits than its leader. Social surplus may deteriorate with competition. Copyright © 2008 The Authors.
Year of publication: |
2008
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Authors: | DATTA, DEBABRATA ; ROY, JAIDEEP |
Published in: |
Manchester School. - School of Economics, ISSN 1463-6786. - Vol. 76.2008, 2, p. 180-195
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Publisher: |
School of Economics |
Saved in:
freely available
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