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Cost of Delay, Deadlines and Endogenous Price Leadership

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  • Pastine, Ivan
  • Pastine, Tuvana

Abstract

This Paper analyses endogenous price leadership in a duopolistic market with differentiated products and symmetrically informed firms. We study the effects of deadlines and discounting in a standard endogenous leadership model. We show that there will be occasional changes in the identity of the price leader with any cost of delay or discounting, however small. By analyzing the incentives that induce a firm to take up the leader position we derive positive predictions about which firm will lead most price changes.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3054.

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Date of creation: Nov 2001
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Handle: RePEc:cpr:ceprdp:3054

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Related research

Keywords: endogenous timing; price leadership; war of attrition;

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References

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  1. Deneckere, Raymond J & Kovenock, Dan, 1992. "Price Leadership," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 143-62, January.
    • Raymond Deneckere & Dan Kovenock, 1988. "Price Leadership," Discussion Papers 773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Leo K. Simon and Maxwell B. Stinchcombe., 1987. "Extensive Form Games in Continuous Time: Pure Strategies," Economics Working Papers 8746, University of California at Berkeley.
  3. Martinelli, Cesar, 1997. "Small firms, borrowing constraints, and reputation," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 91-105, May.
  4. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  5. Boyer, Marcel & Moreaux, Michel, 1987. "Being a leader or a follower: Reflections on the distribution of roles in duopoly," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 175-192.
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  7. Mark Gertler & Simon Gilchrist, 1991. "Monetary Policy, Business Cycles and the Behavior of Small Manufacturing Firms," NBER Working Papers 3892, National Bureau of Economic Research, Inc.
  8. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
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  10. Damme, E.E.C. van & Hurkens, J.P.M., 1998. "Endogenous price leadership," Discussion Paper 98.68, Tilburg University, Center for Economic Research.
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  13. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  14. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
  15. Arthur Fishman, 1994. "Asymmetric Price Competition with Price Inertia," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 608-618, Winter.
  16. Holthausen, Duncan M, 1979. "Kinky Demand, Risk Aversion and Price Leadership," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 341-48, June.
  17. Amir Rabah, 1995. "Endogenous Timing in Two-Player Games: A Counterexample," Games and Economic Behavior, Elsevier, vol. 9(2), pages 234-237, May.
  18. Pal, Debashis, 1996. "Endogenous Stackelberg Equilibria with Identical Firms," Games and Economic Behavior, Elsevier, vol. 12(1), pages 81-94, January.
  19. Ono, Yoshiyasu, 1982. "Price Leadership: A Theoretical Analysis," Economica, London School of Economics and Political Science, vol. 49(193), pages 11-20, February.
  20. 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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