Firm Size and Pricing Policy

Prabal Roy Chowdhury ()

MPRA Paper from University Library of Munich, Germany

Abstract: We relate the pricing policy of the firms to their size, where firm size is interpreted as the size of the clientele served by the concerned firm. We argue that a firm with a large clientele faces a more severe reputational backlash if it reneges. This allows the firm to effectively commit to its offers, leading to a unique equilibrium without delay, where the firm extracts the whole of the surplus. For smaller firms, however, the reputational effects are much less intense and, consequently, the equilibria involve reneging possibilities. In this case the equilibria are non-unique, and may involve delays as well.

Keywords: Firm size; reneging; reputation. (search for similar items in EconPapers)
JEL-codes: D40 C78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2006-06
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