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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