Sequential Pricing in Successive or Bilateral Monopolies with Separate Consumer Groups

Jong-Hee Hahn and Youngjun Lee
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Youngjun Lee: University of Rochester

Korean Economic Review, 2023, vol. 39, 495-516

Abstract: This paper considers vertical bilateral monopolies facing two consumer groups with different demands for the final product composed of two perfect complements. In contrast to traditional theories, second-mover advantages may appear, and sequential pricing is superior to simultaneous pricing in terms of welfare. This phenomenon occurs because the standard first-mover advantage is eroded in the bilateral pricing game due to the follower’s threat of shutting down the smaller market. The follower may wish to commit to uniform pricing to take advantage of its strategic position.

Keywords: Bilateral or Successive Monopolies; Vertical Markets; Second-mover Advantages; Cournot Complements (search for similar items in EconPapers)
JEL-codes: L11 L13 (search for similar items in EconPapers)
Date: 2023
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