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Sales Technology And Price Leadership

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  • DEBABRATA DATTA
  • JAIDEEP ROY

Abstract

Two firms sell a homogeneous product to two buyers who differ significantly in their valuation of the good and are allowed to charge (possibly) multiple two‐part tariffs. Firms decide upon optimal prices and the choice of sales technologies which help acquire revenues from nonlinear prices. There is a subgame‐perfect equilibrium where firms choose different sales technologies and the firm with an advanced sales technology emerges to be a price leader, charging a two‐part tariff and selling only to the low‐valuation buyers. Consequently, the firm with the less advanced sales technology follows, charges only a fixed fee and serves the high‐valuation buyers and always earns strictly higher profits than its leader. Social surplus may deteriorate with competition.

Suggested Citation

  • Debabrata Datta & Jaideep Roy, 2008. "Sales Technology And Price Leadership," Manchester School, University of Manchester, vol. 76(2), pages 180-195, March.
    • Handle: RePEc:bla:manchs:v:76:y:2008:i:2:p:180-195
    DOI: 10.1111/j.1467-9957.2007.01055.x
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    References listed on IDEAS

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    1. Brown,Stephen J. & Sibley,David Sumner, 1986. "The Theory of Public Utility Pricing," Cambridge Books, Cambridge University Press, number 9780521314008, January.
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