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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
    as

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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.
    3. Valerie Y. Suslow, 1986. "Estimating Monopoly Behavior with Competitive Recycling: An Application to Alcoa," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 389-403, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Colucci, Domenico & Doni, Nicola & Ricchiuti, Giorgio & Valori, Vincenzo, 2022. "Market dynamics with a state-owned dominant firm and a competitive fringe," Chaos, Solitons & Fractals, Elsevier, vol. 161(C).
    2. Hellmann, Thomas & Thiele, Veikko, 2022. "May the force be with you: Investor power and company valuations," Journal of Corporate Finance, Elsevier, vol. 72(C).
    3. 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.
    4. 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.

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    More about this item

    Keywords

    Competition; Duopoly; Equilibrium; Price Leadership;
    All these keywords.

    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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