Endogenous price leadership
We consider a linear price setting duopoly game with differentiated products and determine endogenously which of the players will lead and which will follow. While the follower role is most attractive for each firm, we show that waiting is more risky for the low cost firm so that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the high cost firm will choose to wait. Hence, the low cost firm will emerge as the endogenous price leader.
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- van Damme, E.E.C. & Hurkens, J.P.M., 1998.
"Endogenous price leadership,"
98.68, Tilburg University, Center for Economic Research.
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Economics Working Papers
190, Department of Economics and Business, Universitat Pompeu Fabra.
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222, Department of Economics and Business, Universitat Pompeu Fabra.
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