The Stackelberg Model as a Partial Solution to the Problem of Pricing in a Network
AbstractWe consider an application of the Stackelberg leader-follower model in prices in a simple two-firm network as a possible way to help resolve externalities that can be harmful to firm profit and welfare. Whilst independent pricing on the network yields lower profit and sometimes even lower welfare than monopoly pricing, we show that by allowing the firms to collude on some prices in a first-stage and set remaining prices independently (competitively) in a second stage, both profit and welfare gains can be made.
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Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2012008.
Length: 16 pages
Date of creation: 2012
Date of revision:
Stackelberg; pricing; network;
Other versions of this item:
- Jolian McHardy & Michael Reynolds & Stephen Trotter, 2012. "The Stackelberg Model as a Partial Solution to the Problem of Pricing in a Network," Working Paper Series 19_12, The Rimini Centre for Economic Analysis.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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.:
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, October.
- Jolian Mchardy, 2006. "Complementary Monopoly And Welfare: Is Splitting Up So Bad?," Manchester School, University of Manchester, vol. 74(3), pages 334-349, 06.
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