A UNILATERAL PRICING POLICY AND THE STACKELBERG EQUILIBRIUM

Kazuhiro Ohnishi ()
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Kazuhiro Ohnishi: Osaka University and Institute for Basic Economic Science, 2-15-12-102 Hanjo, Minoo, Osaka 561-0044, Japan

International Game Theory Review (IGTR), 2010, vol. 12, issue 03, 205-210

Abstract: Cooper (1986) examines the equilibrium of the retroactive most-favored-customer pricing policy by using a two-period duopoly model. He shows that the most-favored-customer policy enables both firms to offer higher prices and to enjoy higher profits. Neilson and Winter (1992) show that even if one firm in a price-setting duopoly adopts the most-favored-customer policy, the equilibrium does not coincide with the Stackelberg solution. This paper introduces a pricing policy by using a one-period two-stage model and shows that if one firm in a price-setting duopoly adopts this policy, then the equilibrium coincides with the Stackelberg solution.

Keywords: Most-favored-customer pricing policy; Stackelberg equilibrium; C72; D21; L13 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1142/S0219198910002611

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