Price leadership with promotions

Maxim Sinitsyn

International Journal of Industrial Organization, 2022, vol. 82, issue C

Abstract: I introduce and analyze a framework of price leadership that incorporates an important feature of a modern retail industry, namely that firms commit to a promotion calendar. In my model, a leader commits to such a calendar in the form of a price distribution, and a follower responds to this strategy. I derive the leader’s optimal price distribution and show that it forces the follower to charge the highest possible price. In contrast to the standard Bertrand outcome, both firms earn positive profits. The framework is extended to incorporate loyal consumers, capacity constraints, and asymmetric costs.

Keywords: Price promotions; Promotion calendars; Mixed strategies; Price leadership (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:82:y:2022:i:c:s0167718722000145

DOI: 10.1016/j.ijindorg.2022.102838

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