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Sequential Pricing in Successive or Bilateral Monopolies with Separate Consumer Groups

Author

Listed:
  • Jong-Hee Hahn

    (Yonsei University)

  • Youngjun Lee

    (University of Rochester)

Abstract

This paper considers vertical bilateral monopolies facing two consumer groups with different demands for the final product composed of two perfect complements. In contrast to traditional theories, second-mover advantages may appear, and sequential pricing is superior to simultaneous pricing in terms of welfare. This phenomenon occurs because the standard first-mover advantage is eroded in the bilateral pricing game due to the follower’s threat of shutting down the smaller market. The follower may wish to commit to uniform pricing to take advantage of its strategic position.

Suggested Citation

  • Jong-Hee Hahn & Youngjun Lee, 2023. "Sequential Pricing in Successive or Bilateral Monopolies with Separate Consumer Groups," Korean Economic Review, Korean Economic Association, vol. 39, pages 495-516.
    • Handle: RePEc:kea:keappr:ker-20230701-39-2-07
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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