Endogenous price leadership and technological differences

Makoto Yano and Takashi Komatsubara

International Journal of Economic Theory, 2006, vol. 2, issue 3‐4, 365-383

Abstract: This study constructs a two‐stage game of price leadership in a duopolistic market for a homogeneous product. In the first period, the two firms determine a price leader; they set a price for the product in the second period. It is demonstrated in the present study that the technologically superior firm tends to become a price leader. This result reveals that price leadership is determined by the interaction of “competitive force”, which prevents the price leader from choosing too high a price (like the joint profit maximizing price or the cartel price), and “collusive force”, which prevents a price from falling to a Bertrand price.

Date: 2006
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https://doi.org/10.1111/j.1742-7363.2006.0041.x

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International Journal of Economic Theory is currently edited by Kazuo Nishimura and Makoto Yano

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