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Equilibrium Selection In The Yano Model Of Price Leadership

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  • Takashi Komatsubara

Abstract

A number of studies have provided a theoretical explanation for the fact that the technologically superior firm becomes a price leader in a duopoly market for a homogeneous product. While previous studies show that the state in which the technologically superior firm becomes a price leader is a Nash equilibrium (superior leader equilibrium), they do not eliminate the possibility that the state in which the technologically inferior firm becomes a price leader is also a Nash equilibrium (inferior leader equilibrium). We demonstrate that an inferior leader equilibrium can be eliminated by the iterative elimination of weakly dominated strategies. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Asia Pty Ltd

Suggested Citation

  • Takashi Komatsubara, 2008. "Equilibrium Selection In The Yano Model Of Price Leadership," Pacific Economic Review, Wiley Blackwell, vol. 13(5), pages 649-655, December.
  • Handle: RePEc:bla:pacecr:v:13:y:2008:i:5:p:649-655
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    References listed on IDEAS

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    Cited by:

    1. Daisuke Hirata & Toshihiro Matsumura, 2011. "Price leadership in a homogeneous product market," Journal of Economics, Springer, vol. 104(3), pages 199-217, November.

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