Endogenous price leadership: A theoretical and experimental analysis
AbstractWe present a model of price leadership on homogeneous product markets where the price leader is selected endogenously. The price leader sets and guarantees a sales price to which followers adjust according to their individual supply functions. The price leader clears the market by serving the residual demand. As price leaders, firms with different marginal costs induce different prices. We compare two mechanisms to determine the price leader, majority voting and competitive bidding. According to the experimental data at least experienced price leaders with lower marginal costs choose higher prices. In the bidding treatment, compensation payments to the price leader crowd in efficiency concerns. --
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Bibliographic InfoPaper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 68.
Date of creation: 2014
Date of revision:
price leadership; majority voting; bidding; experimental economics;
Other versions of this item:
- Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra Zaby, 2013. "Endogenous Price Leadership - A Theoretical and Experimental Analysis," Jena Economic Research Papers 2013-039, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-02 (All new papers)
- NEP-COM-2014-02-02 (Industrial Competition)
- NEP-EXP-2014-02-02 (Experimental Economics)
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