The Stackelberg Model as a Partial Solution to the Problem of Pricing in a Network
We consider an application of the Stackelberg leader-follower model in prices in a simple two-firm network as a possible way to help resolve externalities that can be harmful to firm profit and welfare. Whilst independent pricing on the network yields lower profit and sometimes even lower welfare than monopoly pricing, we show that by allowing the firms to collude on some prices in a first-stage and set remaining prices independently (competitively) in a second stage, both profit and welfare gains can be made.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: 9 Mappin Street, SHEFFIELD, S1 4DT|
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Web page: http://www.shef.ac.uk/economics
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, December.
- Jolian Mchardy, 2006. "Complementary Monopoly And Welfare: Is Splitting Up So Bad?," Manchester School, University of Manchester, vol. 74(3), pages 334-349, 06.
- Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-23, March.
When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2012008. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jacob Holmes)
If references are entirely missing, you can add them using this form.