A Model of Price Leadership Based on Consumer Loyalty

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A Model of Price Leadership Based on Consumer Loyalty

Author Info

Deneckere, Raymond J
Kovenock, Dan
Lee, Robert

Additional information is available for the following registered author(s):

Dan Kovenock

Abstract

This paper analyzes a duopolistic price setting game in which firms have loyal consumer segments but cannot distinguish them from price-sensitive consumers. The authors adapt a variant of H. Varian's (1980) simultaneous price setting game to analyze price-leader equilibria. The properties of the price-leader equilibria with an exogenously specified leader motivate the construction of a game of timing in which the firm with the larger segment of loyal consumers becomes an endogenous price leader. This demonstrates that consumer loyalty may play an important role in establishing the existence and identity of a price leader. Copyright 1992 by Blackwell Publishing Ltd.

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Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 40 (1992)
Issue (Month): 2 (June)
Pages: 147-56
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Handle: RePEc:bla:jindec:v:40:y:1992:i:2:p:147-56

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Paper
- Deneckere, R. & Kovenock, D. & Lee, R.E., 1988. "A Model of Price Leadership Based on Consumer Loyalty," Purdue University Economics Working Papers 947, Purdue University, Department of Economics.

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