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Endogenous price leadership

Eric van Damme and Sjaak Hurkens

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We consider a linear price setting duopoly game with di®erentiated products and determine endogenously which of the players will lead and which will follow. While the follower role is most attractive for each firm, we show that waiting is more risky for the low cost firm so that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the high cost firm will choose to wait. Hence, the low cost firm will emerge as the endogenous price leader.

Keywords: Price leadership; endogenous timing; risk dominance (search for similar items in EconPapers)
JEL-codes: C72 D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent and nep-net
Date: 2001-11
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Related works:
Journal Article: Endogenous price leadership (2004) Downloads
Working Paper: Endogenous price leadership (2004) Downloads
Working Paper: Endogenous price leadership (1998) Downloads
Working Paper: Endogenous price leadership (1998) Downloads
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