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Sales Technology And Price Leadership

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Author Info
DEBABRATA DATTA
JAIDEEP ROY

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Abstract

Two firms sell a homogeneous product to two buyers who differ significantly in their valuation of the good and are allowed to charge (possibly) multiple two-part tariffs. Firms decide upon optimal prices and the choice of sales technologies which help acquire revenues from nonlinear prices. There is a subgame-perfect equilibrium where firms choose different sales technologies and the firm with an advanced sales technology emerges to be a price leader, charging a two-part tariff and selling only to the low-valuation buyers. Consequently, the firm with the less advanced sales technology follows, charges only a fixed fee and serves the high-valuation buyers and always earns strictly higher profits than its leader. Social surplus may deteriorate with competition. Copyright © 2008 The Authors.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2007.01055.x
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Publisher Info
Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 76 (2008)
Issue (Month): 2 (03)
Pages: 180-195
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Handle: RePEc:bla:manchs:v:76:y:2008:i:2:p:180-195

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This page was last updated on 2009-12-19.

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