The present paper first considers two firms in a homogeneous market competing in a two-stage game. Using a particular strategy, it shows that firms may be able to set prices above the marginal costs and thus get positive profits. This remarkable result is robust to the number of firms and to cost asymmetries. Furthermore and more importantly, when firms' costs are different, firms obtain positive profits even though they set prices at the highest marginal cost.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number
we050902.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Deneckere, Raymond J & Kovenock, Dan, 1992.
"Price Leadership,"
Review of Economic Studies,
Blackwell Publishing, vol. 59(1), pages 143-62, January.
[Downloadable!] (restricted)
Other versions:
Raymond Deneckere & Dan Kovenock, 1988.
"Price Leadership,"
Discussion Papers
773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Levitan, Richard & Shubik, Martin, 1972.
"Price Duopoly and Capacity Constraints,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-22, February.
[Downloadable!] (restricted)
Other versions: