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The History of the Static Equilibrium Dominant Firm Price Leadership Model

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Author Info

  • Christoph Schenzler

    (Vanderbilt University)

  • John J. Siegfried

    (Vanderbilt University)

  • William O. Thweatt

    (Vanderbilt University)

Abstract

The static equilibrium dominant firm price leadership model is traced to a seminar presentation by Karl Forchheimer in 1906, who seems to have originated the concept of a dominant firm facing competition from fringe rivals maximizing profits on the basis of residual demand--industry demand less quantity supplied by the fringe. Heinrich von Stackelberg completed the model analytically in 1934, although in a duopoly context absent stable equilibrium. George Stigler finally combined von Stackelberg's comparative statics with Forchheimer's price-taking fringe rivals, to articulate (in 1940) the equilibrium model as it has been used in countless intermediate microeconomics texts and classrooms for the half century since.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume18/V18N2P171_186.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 18 (1992)
Issue (Month): 2 (Spring)
Pages: 171-186

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Handle: RePEc:eej:eeconj:v:18:y:1992:i:2:p:171-186

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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Related research

Keywords: Competition; Duopoly; Equilibrium; Price Leadership;

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References

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  1. Gavin C. Reid, 1979. "Forchheimer on Partial Monopoly," History of Political Economy, Duke University Press, vol. 11(2), pages 303-308, Summer.
  2. Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
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Citations

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Cited by:
  1. Siegfried, John J. & Latta, Christopher, 1998. "Competition in the Retail College Textbook Market," Economics of Education Review, Elsevier, vol. 17(1), pages 105-115, February.
  2. Nicola Giocoli, 2012. "Who Invented the Lerner Index? Luigi Amoroso, the Dominant Firm Model, and the Measurement of Market Power," Review of Industrial Organization, Springer, vol. 41(3), pages 181-191, November.

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