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The History of the Static Equilibrium Dominant Firm Price Leadership Model

Author

Listed:
  • Christoph Schenzler

    (Vanderbilt University)

  • John J. Siegfried

    (Vanderbilt University)

  • William O. Thweatt

    (Vanderbilt University)

Abstract

The static equilibrium dominant firm price leadership model is traced to a seminar presentation by Karl Forchheimer in 1906, who seems to have originated the concept of a dominant firm facing competition from fringe rivals maximizing profits on the basis of residual demand--industry demand less quantity supplied by the fringe. Heinrich von Stackelberg completed the model analytically in 1934, although in a duopoly context absent stable equilibrium. George Stigler finally combined von Stackelberg's comparative statics with Forchheimer's price-taking fringe rivals, to articulate (in 1940) the equilibrium model as it has been used in countless intermediate microeconomics texts and classrooms for the half century since.

Suggested Citation

  • Christoph Schenzler & John J. Siegfried & William O. Thweatt, 1992. "The History of the Static Equilibrium Dominant Firm Price Leadership Model," Eastern Economic Journal, Eastern Economic Association, vol. 18(2), pages 171-186, Spring.
  • Handle: RePEc:eej:eeconj:v:18:y:1992:i:2:p:171-186
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume18/V18N2P171_186.pdf
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    References listed on IDEAS

    as
    1. Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
    2. Gavin C. Reid, 1979. "Forchheimer on Partial Monopoly," History of Political Economy, Duke University Press, vol. 11(2), pages 303-308, Summer.
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    Citations

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    Cited by:

    1. Nicola Giocoli, 2012. "Who Invented the Lerner Index? Luigi Amoroso, the Dominant Firm Model, and the Measurement of Market Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(3), pages 181-191, November.
    2. Siegfried, John J. & Latta, Christopher, 1998. "Competition in the Retail College Textbook Market," Economics of Education Review, Elsevier, vol. 17(1), pages 105-115, February.

    More about this item

    Keywords

    Competition; Duopoly; Equilibrium; Price Leadership;

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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