A Unilateral Pricing Policy And The Stackelberg Equilibrium
Cooper (1986) examines the equilibrium of the retroactive most-favored-customer pricing policy by using a two-period duopoly model. He shows that the most-favored-customer policy enables both firms to offer higher prices and to enjoy higher profits. Neilson and Winter (1992) show that even if one firm in a price-setting duopoly adopts the most-favored-customer policy, the equilibrium does not coincide with the Stackelberg solution. This paper introduces a pricing policy by using a one-period two-stage model and shows that if one firm in a price-setting duopoly adopts this policy, then the equilibrium coincides with the Stackelberg solution.
Volume (Year): 12 (2010)
Issue (Month): 03 ()
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- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
- Kazuhiro Ohnishi, 2003. "A Model of a Price-setting Duopoly with a Wage-rise Contract," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 149-157, 06.
- Aguirre, Inaki, 2000. "The Most-Favoured-Customer Pricing Policy and Competitive Advantage," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 215-23, July.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- Neilson, William S. & Winter, Harold, 1992. "Unilateral most-favored-customer pricing : A comparison with Stackelberg," Economics Letters, Elsevier, vol. 38(2), pages 229-232, February.
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