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A Unilateral Pricing Policy And The Stackelberg Equilibrium

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  • KAZUHIRO OHNISHI

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

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    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.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

    Volume (Year): 12 (2010)
    Issue (Month): 03 ()
    Pages: 205-210

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    Handle: RePEc:wsi:igtrxx:v:12:y:2010:i:03:p:205-210

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    Related research

    Keywords: Most-favored-customer pricing policy; Stackelberg equilibrium; C72; D21; L13;

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    References

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    1. Kazuhiro Ohnishi, 2003. "A Model of a Price-setting Duopoly with a Wage-rise Contract," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 149-157, 06.
    2. Aguirre, Inaki, 2000. "The Most-Favoured-Customer Pricing Policy and Competitive Advantage," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 215-23, July.
    3. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    4. Neilson, William S. & Winter, Harold, 1992. "Unilateral most-favored-customer pricing : A comparison with Stackelberg," Economics Letters, Elsevier, vol. 38(2), pages 229-232, February.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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