List princing and pure strategy outcomes in a bertrand edgeworth duopoly
AbstractNon-existence of a pure strategy equilibrium in a Bertrand-Edgeworth duopoly model is analyzed. The standard model is modified to include a list pricing stage and a subsequent price discounting stage. List pricing works as a credible commitment device that induces the pure strategy outcome. It is shown that for a general class of rationing rules there exists a sub-game perfect equilibrium that involves both firms playing pure strategies. This equilibrium payoff dominates any other sub-game perfect equilibrium of the game. Further unlike the dominant firm interpretation of a price leader, we show that the small firm may have incentives to commit to a low price and in this sense assume the role of a leader.
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Bertrand-Edgeworth; List pricing; discounts; mixed-nash; credibility; commitment;
Other versions of this item:
- Antón García Díaz & Praveen Kujal, 2003. "List Pricing And Pure Strategy Outcomes In A Bertrand-Edgeworth Duopoly," Economics Working Papers we034918, Universidad Carlos III, Departamento de Economía.
- García Díaz, Antón & Kujal, Praveen, . "List pricing and pure strategy outcomes in a Bertrand-Edgeworth duopoly," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/300, Universidad Carlos III de Madrid.
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