A Model of Price Leadership Based on Consumer Loyalty
AbstractThis paper analyzes a duopolistic price setting game in which firms have loyal consumer segments but cannot distinguish them from price-sensitive consumers. The authors adapt a variant of H. Varian's (1980) simultaneous price setting game to analyze price-leader equilibria. The properties of the price-leader equilibria with an exogenously specified leader motivate the construction of a game of timing in which the firm with the larger segment of loyal consumers becomes an endogenous price leader. This demonstrates that consumer loyalty may play an important role in establishing the existence and identity of a price leader. Copyright 1992 by Blackwell Publishing Ltd.
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Bibliographic InfoPaper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 947.
Length: 13 pages
Date of creation: 1988
Date of revision:
monopolies ; pricing ; consumer behaviour;
Other versions of this item:
- Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 147-56, June.
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